Work

A Model of External Debt Sustainability and Monetary Hierarchy

Year: 2025

Type: article

Abstract: ABSTRACT I develop a dynamic macroeconomic model of a small open economy to identify two key vulnerabilities that prevent emerging markets from fully integrating into global markets: high financial integration costs and their low position in the international monetary hierarchy. These vulnerabilities make them susceptible to financial traps, jeopardize debt sustainability and increase volatility. I show that the weak response of capital flows to interest rates further limits the ability of monetary policy to stabilize the system. As a result, these economies have restricted policy options and often resort to mimicking external monetary policy strategies in times of financial distress.

Source: Metroeconomica

DOI: 10.1111/meca.70001

Author: Nicolás M. Burotto

Institution: Universidad Andrés Bello

Language: English

Topic: Global Financial Crisis and Policies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: bronze

Funders: University of Greenwich, University of Leeds, Coordenação de Aperfeiçoamento de Pessoal de Nível Superior, Conselho Nacional de Desenvolvimento Científico e Tecnológico, Universidade Federal do Rio de Janeiro

OpenAlex ID: W4416675191

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Cites: 35

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