A characteristic of the current crisis in Europe is that countries in its periphery have found themselves increasingly cut off from international financial markets. In the present study we ask how such changes in the financial structure influence the welfare consequences of maintaining a fixed exchange rate regime. We address this issue in the context of a dynamic model of an emerging economy with involuntary unemployment developed in an earlier paper (Schmitt-Grohé and Uribe 2011).
Attribution-NonCommercial-NoDerivs 3.0 Chile
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