توسعه مالی و بی ثباتی اقتصادهای باز

This paper introduces a framework for analyzing the role of financial factors as a source of instability in small open economies. Our basic model is a dynamic open economy model with a tradeable good produced with capital and a country-specific factor. We also assume that firms face credit constraints, with the constraint being tighter at a lower level of financial development. A basic implication of this model is that economies at an intermediate level of financial development are more unstable than either very developed or very underdeveloped economies. This is true both in the sense that temporary shocks have large and persistent effects and also in the sense that these economies can exhibit cycles. Thus, countries that are going through a phase of financial development may become more unstable in the short run. Similarly, full capital account liberalization may destabilize the economy in economies at an intermediate level of financial development: phases of growth with capital inflows are followed by collapse with capital outflows. On the other hand, foreign direct investment does not destabilize.

This paper introduces a framework for analyzing the role of financial factors as a source of instability in small open economies. Our basic model is a dynamic open economy model with a tradeable good produced with internationally mobile capital and a country-specific factor. Moreover, firms face financial constraints: the amount they can borrow is limited to μμ times the amount of their current level of investible funds.1 A high μμ then represents an effective and developed financial sector while a low μμ represents an underdeveloped one. Our model can provide some answers to a number of important and rather basic questions. First, we show that it is economies at an intermediate level of financial development—rather than the very developed or underdeveloped—that are the most unstable. This is true both in the sense that temporary shocks will have large and persistent effects and also in the sense that these economies can exhibit stable limit cycles. Thus, countries going through a phase of financial development may become more unstable in the short run.

The previous sections have analyzed a stylized model that illustrates how the interaction between credit market imperfections and real exchange rate fluctuations can cause instability in some open economies. We have purposely abstracted from numerous factors making the analysis more realistic which could further affect the dynamics. In this section we examine several directions in which our simple framework can be extended and discuss policy implications.