IS-LM-BP in the Pampas

Luis Felipe Cespedes, Roberto Chang, Andres Velasco

NBER Working Paper No. 9337
Issued in November 2002
NBER Program(s):   IFM

Emerging markets (sometimes endowed with fertile pampas) have limited access to world capital markets and suffer from original sin: they cannot borrow in their own currency. Does this mean that monetary and exchange rate policy has non-standard effects in such countries? We develop a simple IS-LM-BP model with balance sheet effects to study that question. Our answer: it all depends.

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