The balance of payments and borrowing constraints: An alternative view of the Mexican crisis

Andrew Atkeson, José Víctor Ríos-Rull

Research output: Contribution to journalArticlepeer-review

15 Scopus citations

Abstract

In this paper we develop a model in which a country faces a balance of payments crisis if constraints on its international borrowing bind. We use the model to describe the dynamics of the trade balance, capital account, and balance of payments of a country that borrows to finance consumption following sweeping macroeconomic and structural reforms and then hits constraints on its international borrowing. We compare the predictions of this theoretical example with events in Mexico from 1987 through 1995.

Original languageEnglish (US)
Pages (from-to)331-349
Number of pages19
JournalJournal of International Economics
Volume41
Issue number3-4
DOIs
StatePublished - Nov 1996

Keywords

  • Balance of payments
  • Exchange rate crises
  • International borrowing
  • Speculative attacks

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