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The stability condition for a structural CA deficit country in a fixed-rate regime without a BanCor is that nominal growth must exceed nominal interest rates on the foreign debt. If the ECBuBa were pursuing a zero risk-free interest rate policy, this would be possible. But it isn't, so it isn't.

If you don't believe me, just derive the convergence criterion yourself.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 08:03:45 AM EST
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