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Cuadernos de Economía

Print version ISSN 0121-4772

Abstract

CASTRO FERNANDEZ, Juan Carlos. FRAGILIDAD FINANCIERA Y TASA DE CAMBIO. Cuad. Econ. [online]. 2011, vol.30, n.55, pp.155-177. ISSN 0121-4772.

A modification to the Foley (2003) model is presented here introducing the role of exchange rate and foreign currency denominated debt in order to determine their influence on financial fragility, using the financial instability hypothesis of Hyman Minsky under flexible exchange rate regime. Firms’ financial positions (hedge, speculative, and Ponzi) are affected by the movements of the exchange rate and of the interest rate. The model proves that nominal depreciation has real effects and may cause financial and economic crises, because a sudden depreciation causes a fall in profit and investment rates through credit cost and capital goods supply prices increase.

Keywords : financial crisis; post-keynesian macroeconomic models; exchange rate; private sector foreign debt.

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