The rapid expansion of private-sector expenditure in the 1990s was accompanied by a massive and increasing foreign capital inflow. A tight economic policy, characterized by high interest rates, was implemented in order to contain the private expenditure growth. As a way of reconciling high...

To limit the risks of a sudden stop in external financing that would jeopardize intertemporal consumption smoothing, the current account deficit should be limited to sustainable levels. However, the volatility of the terms of trade and some export volumes cause difficulties in assessing a...

This paper presents a simple model based on several equilibrium relationships between the real exchange rate —the relative price of tradable and non tradable goods— and monetary policy, represented by the real interest rate. The domestic equilibrium represents the real exchange rate response...