Non-homothetic sudden stops

• 成果类型: Article
• 署名作者: Rojas, Eugenio; Saffie, Felipe
• 署名单位: State University System of Florida; University of Florida; University of Virginia
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2022.103680
• 发表日期: 2022
• 关键词: Macroprudential policy; Expenditure elasticity; financial crises

摘要

The expenditure elasticity of the demand for nontradable goods is higher than the one for trad-able goods. We extend the small open economy model of Sudden Stops of Bianchi (2011) allowing for non-homothetic preferences to generate this difference. Analytic results for an en-dowment economy show that, during crises, the non-homotheticity amplifies the decrease in the demand for the nontradable good, triggering a sharper deflation spiral that ultimately leads to a more severe current account reversal. The amplified pecuniary externality calls for more aggressive debt taxes. An extended version of the model with production and permanent productivity shocks shows that non-homothetic preferences can also amplify the credit booms that precede Sudden Stops. The amplification is particularly large when the consumption boom is biased toward nontradable goods. Macroprudential policy shows, not only quantitative, but also qualitative differences in its reaction to shocks under preference non homotheticity.(c) 2022 Elsevier B.V. All rights reserved.