Balance-of-Payments Dominance: Implications for Macroeconomic Policy

this chapter discusses what the author calls the balance of payments dominance on macroeconomic policy, defined as a macroeconomic regime in which short-term dynamics is largely determined by external, mainly financial, shocks. Typically emerging market economies suffer from this dominance and are prone to boom-and-bust cycles led by external financial shocks.

Keywords: balance of payments dominance, trade shocks, financial shocks, pro-cyclical economic policy, macroprudential regulations, managed exchange rate flexibility, emerging market economies

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Mario Damill, Martín Rapetti, and Guillermo Rozenwurcel

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Balance-of-Payments Dominance

Balance-of-Payments Dominance

Implications for Macroeconomic Policy

José Antonio Ocampo