Small very open economies are different from large economies, in that they face a foreign exchange constraint that cannot be alleviated by depreciation of the real exchange rate or other policy. This constraint affects monetary, fiscal and exchange rate policy; fiscal sustainability and debt...

This chapter draws inferences from the recent literature on open-economy macroeconomics about policies to achieve sustainable economic growth with stable external account balances and low inflation in small developing economies

This chapter recommends an alternative to the standard approach to economic stabilisation and growth policy for small open economies. The standard view, reflected in the analyses of the IMF, other international institutions, most think tanks and the media, is that a combination of credible...