Question: Suppose that the parameters are initially such that in equilibrium the trade balance is negative and the collateral constraint does not bind. Qualitatively evaluate the

Suppose that the parameters are initially such that in equilibrium the trade balance is negative and the collateral constraint does not bind. Qualitatively evaluate the impact of a shock that "tightens" the collateral constraint on the economy's trade balance (suppose the shock is sufficiently bad so that the constraint binds after the shock), i.e., a shock where falls to a lower value

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