Foreign Indebtedness, Inflation and Exchange Rate Overshooting
Why are exchange rates more volatile than the nominal price level? Does the foreign debt increase or decline with national income? This chapter intends to give a theoretical answer to these two questions of international and monetary economic theory. The model setup in which these questions are treated is a standard representative agent utilitarian model, allowing for long-run growth due to constant returns to scale with respect to reproducible factors.
KeywordsExchange Rate Interest Rate Monetary Policy Capital Stock Real Exchange Rate
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