This paper provides a critical analysis of expansionary austerity theory (EAT). The focus is on the theoretical weaknesses of EAT-the extreme circumstances and fragile assumptions under which expansionary consolidations might actually take place. The paper presents a simple theoretical model...

This paper presents a simple post-Keynesian model, which highlights the importance of productive development in defining the dynamics of the Real Exchange Rate (RER) and foreign debt in a small open developing economy. In developing countries that are integrated in international financial...