This paper introduces a framework for analyzing the role of financial factors as a source of instability in small open economies. Our basic model is a dynamic open economy model with a tradeable good produced with capital and a country-specific factor. We also assume that firms face credit...

This paper introduces a framework for analyzing the role of financial factors as a source of instability in small open economies. Our basic model is a dynamic open economy model with a tradeable good produced with capital and a country-specific factor. We also assume that firms face credit...

Several studies have been conducted on how financial development is affected by socioeconomic and pollical factors, however, little attention has been paid to how exchange rate volatility affects the level of financial development in developing countries, especially in Africa. Given this, this...