Is a real business cycle model extended with non-stationary technology shocks able to describe small open economies or are credit market imperfections necessary in addition? This study addresses this question by providing evidence of the relative ability of a model with and without financial...

In this paper we ask whether tighter monetary and fiscal policies are the right way to face a sudden stop (a sudden curtailment in capital flows) in a typical emerging economy. We develop exogenous measures of fiscal and monetary policy response and conclude that tighter policies are associated...