Empirical growth equations are typically explained by (i) the history of the exchange rate regimes, (ii) capital market liberalization regimes, and (iii) actual balance of payments crises. The literature on the effects of policy switches on growth typically ignores the effect of policy on the likelihood of crises, and, in turn, the effect of crises on growth. It ignored a key explanatory variab...

This paper generates a typology of balance-of-payments crises under rational expectations, namely liquidity crises and solvency crises. The ex-post application of official financial rescue packages of sufficient size is a perfect cure for liquidity crises but amounts to an ineffective and costly bailout of private investors in the case of solvency crises. The anticipation of the rescue program ...

national currency depreciation or appreciation has always been argued seriously among policymakers since changing in exchange rate could cause improvement or deficit in trade balance. these changes affect the trade volume of a country in both short-run and long-run. long-run effects are recognized as the marshall-lerner condition, while short-run effects are analyzed by two concepts: j-curve an...

Assuming preferences to be generated by an aggregate utility function, an aggregate demand function for imports and exports is defined as a function of import and export prices and the deficit in the balance of payments on current account, in a model with nontradable as well as traded goods. It is shown that this function is integrable, hence can be generated by maximizing a utility function (w...