Abstract
Original language | English |
---|---|
Pages (from-to) | 73-88 |
Number of pages | 16 |
Journal | Ekonomia |
Volume | 7 |
Issue number | 2 |
Publication status | Published - 2005 |
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Keywords
- stock market
- international debt
- the real exchange rate
Cite this
An Intertemporal Model of the Real Exchange Rate, Stock Market, and International Debt Dynamics. / Gazioglu, Saziye; McCausland, W David.
In: Ekonomia, Vol. 7, No. 2, 2005, p. 73-88.Research output: Contribution to journal › Article
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TY - JOUR
T1 - An Intertemporal Model of the Real Exchange Rate, Stock Market, and International Debt Dynamics
AU - Gazioglu, Saziye
AU - McCausland, W David
PY - 2005
Y1 - 2005
N2 - This paper develops an open economy intertemporal optimising model that seeks to analyse the effect of bill financed government expenditure on several key financial markets. The main results suggest that an increase in bill financed government expenditure leads to a rise in net international debt, a fall in the domestic real exchange rate and a fall in the stock market value. Furthermore, due to the presence of non-linearities in the model, reversing the deficit financing policy doesn't restore the initial net international credit, high stock market value state. Instead, the country finds itself stuck in an international debt and low stock market value trap.
AB - This paper develops an open economy intertemporal optimising model that seeks to analyse the effect of bill financed government expenditure on several key financial markets. The main results suggest that an increase in bill financed government expenditure leads to a rise in net international debt, a fall in the domestic real exchange rate and a fall in the stock market value. Furthermore, due to the presence of non-linearities in the model, reversing the deficit financing policy doesn't restore the initial net international credit, high stock market value state. Instead, the country finds itself stuck in an international debt and low stock market value trap.
KW - stock market
KW - international debt
KW - the real exchange rate
M3 - Article
VL - 7
SP - 73
EP - 88
JO - Ekonomia
JF - Ekonomia
SN - 1025-5508
IS - 2
ER -