A growth model of a developing economy facing an upward sloping supply curve of debt is analyzed. Equilibrium is characterized by transitional dynamics in which consumption, capital, and debt converge to a common growth rate. The adjustment is through the debt-capital ratio, which drives the...

The adoption of a Taylor-type monetary policy rule and an inflation target for emerging market economies that choose a flexible exchange rate regime is often advocated. This paper investigates the issue of exchange rate determination when interest-rate feedback rules are implemented in a...