Timeline for Macroeconomic model of the open economy - NCO and loanable funds
Current License: CC BY-SA 4.0
6 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Apr 29, 2021 at 9:55 | comment | added | Studi | Sorry, I never commented. I think I'm just too stupid. "... reverse the FX without trade (foreign investment in domestic markets?)." - The drying up of foreign investment would then lead to a fall in the demand for loans (they're not investing). However there are also domestic investors and they would demand loans to invest in foreign capital. So surely it depends who is "bigger". In most cases I would assume the rest of the world is bigger thus leading lowering demand for loans. Which is the exact opposite of what you want to explain to me! | |
| Dec 14, 2020 at 15:16 | comment | added | SystemTheory | @Food Consider elastic money supply in Nation A and B where bank loans plus securities plus reserves create deposits plus bank equity claims. Deposits A and B are the respective money supply. International trade causes a swap of claims to deposits A/B via FX markets but does not change the levels of A or B. Balanced trade means FX positions net to zero. Persistent trade imbalance would wind up increasing FX positions unless a mechanism exists to reverse the FX without trade (foreign investment in domestic markets?). Bank loans are elastic part loanable funds. Does flight trigger loan demand? | |
| Dec 14, 2020 at 12:46 | comment | added | Studi | The quote that you put in your 1st para is the most common explanation. - which isn't really explaining things. I think I've found the "mainstream" explanation in Mankiw (Economics 4th edition p615): "When net capital outflow increases there is greater demand for loanable funds to finance these purchases of capital assets abroad." So my understanding here is that foreign investors leave (that wouldn't necessarily add to demand for loanable funds) but the domestic investors are leaving to thus increasing the demand. Finally, I tend towards the situation in the first para. MMT right | |
| Dec 13, 2020 at 18:34 | history | edited | SystemTheory | CC BY-SA 4.0 |
added 519 characters in body
|
| Dec 13, 2020 at 18:20 | history | edited | SystemTheory | CC BY-SA 4.0 |
added 519 characters in body
|
| Dec 13, 2020 at 18:10 | history | answered | SystemTheory | CC BY-SA 4.0 |