Martín Tetaz

I show that under certain assumptions (such as financial constraints), the possibility of unstable equilibriums arise. Moreover, if a wide share of the public budget is denominated in foreign currency, any exogenous shock whereby the dollar price rose would worse the fiscal situation, and therefore would trigger a loop process as follows; The government issue money to finance the deficit then the dollar price rises again and the budget situation get even worse, and so on. Finally the only stable way to depress the price of the dollar as well

Descargar PDF