Questions tagged [open-economy-macro]
The open-economy-macro tag has no usage guidance.
60
questions
3
votes
0answers
20 views
Elasticity of substitution in leisure
This might be a very basic question, but I am a beginner in macro models. I would appreciate help with my doubt.
In different papers I have read about the elasticity of labor supply or the inverse of ...
0
votes
0answers
11 views
Why do we spread knowledge across nations?
We have access to lots of knowledge on paper sharing platforms, open course platforms, open-source platforms and question asking platforms and etc. I don't know why we are not afraid of the backfires ...
2
votes
0answers
31 views
Log-linear version of current account equation
I am working on my thesis, doing a two-country model with traded and non-traded goods considering incomplete asset markets and imperfect pass-through. In a sense, I am following Benigno & ...
0
votes
0answers
14 views
Log-linearization of real exchange rate
I have a doubt on how to log linearize an expression for the real exchange rate. I have read in several papers that they express it using substitutions. I haven't been able to find out what ...
0
votes
1answer
16 views
Log-linear version of the uncovered interest rate parity
I am trying to derive the log-linear version of the uncovered interest rate parity under complete asset markets.
I know that the UIP condition is given by
$$(1+i_t)=(1+i^*_t)\frac{S_{t+1}}{S_t}$$
I ...
1
vote
0answers
44 views
Transversality Condition
I am reading the first section of chapter 10 of the Obstfeld and Rogoff textbook Foundations of International Economics and I have a doubt in how the transversality condition is obtained. Even though ...
1
vote
0answers
27 views
Non-traded goods in Two Country New Keynesian Model
I am working on a two-country New Keynesian model, where I include traded and non-traded goods. The final good is produced using traded and non-traded inputs:
$$
Z_t=\bigg[a^\frac{1}{\kappa}Z_{T,t}^{\...
0
votes
2answers
23 views
What does it mean if a country's exchange rate is said to be “overvalued”?
For instance, China's or Switzerland's currencies are often said to be overvalued.
1
vote
1answer
73 views
When to use a lagrange multiplier?
I have a question in regards to the use of Lagrange multipliers in macro models.
I have seen that when writing a Lagrange there are two ways to write the Lagrange multiplier: 1) Indexed or 2) ...
2
votes
0answers
10 views
When does the interest rate parity curve shift?
Given the IS LM IRP model,
can somebody tell me the difference for when there is a movement along the IRP curve and when there is an actual shift in the IRP curve?
0
votes
0answers
35 views
How to calculate the multiplier in an open economy?
So suppose there is an open economy were only the goods market exists:
C=0.6(Y-T)
T=0.25Y
Imports=0.2Y
exchange rate=1
exports=0
Investment and government spending added up together=6.
How to you ...
0
votes
1answer
16 views
How does exchange rate change with respect to interests?
If the central bank raises intereat rates, isn't the money supply now less and the exchange rate is greater? I have run into opposite statements and dont know how to approach this problem.
Thanks in ...
0
votes
1answer
30 views
Which one of these intepretations of belonging of a factor of production is correct in context of calculating “income of our citizens abroad”?
NFFI can be calculated as income of foreigners here MINUS income of our citizens/corporations abroad. As far as I understand, it's assumed that our citizens earn income by using OUR factors of ...
0
votes
0answers
28 views
Analyse the influence of interior demand and trade on exports
I would like to have a primer on how the current slowdown of the German economy is affecting its partners, for instance France, Spain and Italy. More specifically, if it goes mainly through Germany's ...
4
votes
1answer
173 views
Bretton Woods vs Gold Standard
I've been reading about the history of the IMF recently, and it strikes me as odd that despite the problems that arose with the gold standard (Germany in the 1920s, Fed cutting money supply during the ...
0
votes
0answers
38 views
Gali (2015) Chapter 8 Symmetric Steady State
In Chapter 8 (small open economy) of Gali's 2015 version of Monetary Policy, Inflation, and the Business Cycle, he often performs log linearisations around a symmetric steady state like below:
My ...
1
vote
0answers
32 views
Why a Current Account deficit implies a Financial Account surplus [duplicate]
Every macro textbook out there states that if a country has a Current Account deficit, it must have a surplus in the Financial account, but I have not heard a convincing explanation.
Imagine a ...
0
votes
0answers
12 views
Why is the present value of outflows = present value of inflow in an small open economy?
So as far as I understand the present value of outflows is the amount of money economy. On the other hand, the present value of inflow is the money coming into the economy (from other countries). ...
3
votes
1answer
682 views
What is a good proxy for government quality?
Is it ok to use corruption as a proxy for government quality?
-2
votes
1answer
52 views
find the equilibrium level of Y [closed]
Assume that the LM curve for a small open economy with a floating exchange rate is given by Y =
200r – 200 + 2(M/P), while the IS curve is Y = 400 + 3G – 2T + 3NX – 200r. The function for NX is
NX = ...
0
votes
0answers
31 views
How should I rebase my GDP?
I have a constant GDP data from 1988 to 2009 in constant 1985 prices and GDP data from 2009 to 2017 in constant 2000 prices. My question is how should I rebase my GDP?
Upon searching the web, i don'...
1
vote
0answers
54 views
Why is it so hard to understand NCO = NE?
A lot of explanations about this matter depend on the fact that the foreign cash could be seen as a foreign assets. They say like "if you export a car and earn 100 yen, then it means that you have now ...
2
votes
1answer
69 views
The Difference between investment and savings in CA identity
Mathematically speaking the current account is defined as:
$$\text{CA}=S-I$$
where $S$ is savings and $I$ is investment.
We know for a closed economy $S=I$ so $CA=0$. practically speaking for an ...
2
votes
2answers
58 views
Are Investments positively or negatively correlated with interest rate
Having just begun self-studying economics, I apologise if this question is too simple.
Do investments increase or decrease with increased interest rate?
According to the small, closed economy model (...
3
votes
1answer
20 views
Why FDI stock in the same year is different in the same reports?
From World Investment Report 2003, in 2000, the US has 12.4% GDP as FDI inward stock and 13.2% GDP as FDI outward stock. These numbers are equivalent to 1274720 million USD, and 1356960 million USD. ...
1
vote
1answer
33 views
Terms definition in Balance of Payment
I have problems in distinguishing among terms in the Balance of Payment / the international balance sheet of a nation.
As far as I know, on Assets and Liabilities sides of BPM, there are Portfolio ...
5
votes
1answer
122 views
Teaching: from Microeconomics to Open-economy macro
I am a new faculty teaching MBA courses. Presently, I am teaching International Financial Management (IFM) and Macroeconomics. I have prepared the syllabus of macroeconomics based on first 9 chapters ...
1
vote
1answer
103 views
Good book on capital flows?
Are there any good textbooks/books for capital flows?
I have found some from searching online, but they are a bit older:
International Capital Flows by Feldstein in 1999
Capital Flows and Crises by ...
0
votes
2answers
61 views
Market crash causes
Does market crash like in 1930 and 2009 are always due to excessive and careless lending activity? Lets say all lending is done in careful manner and no corporate fraud is done somehow, would it be ...
0
votes
1answer
390 views
Net Positions vs Gross Positions as they Relate to the Current Account
What is the difference between say, gross asset and liability positions and net asset and liability positions? I mean these terms in the particular way that Cavallo and Tille use them in their 2006 ...
1
vote
0answers
84 views
Can the current account go into deficit with zero capital mobility?
So, can it? The supposition is that this has been caused by an increase in domestic residents' marginal propensity to import.
My thought would have been: no, it cannot, but my answer seems too simple ...
2
votes
1answer
253 views
Appropriate estimator for FDI “gravity” model
I am trying to model Foreign Direct Investment (FDI) flows and am facing several issues;
There is the well-known condition that under heteroskedasticity log-linearized OLS models are biased and ...
1
vote
0answers
46 views
Understanding the complex relationship between macro and micro economic factor: Job shift
As the world knows plenty of manufacturing jobs shifted from various countries to China. This macroeconomic trend of consolidating manufacturing jobs in China has been going on for past 30 years. ...
1
vote
2answers
118 views
Why did the hybrid Phillips Curve become flatter (as empirical data shows) after the crisis?
The Phillips Curve equation is:
$$\pi_t=\pi_t^e + \beta_1 (\beta_2 Y_t + (1-\beta_2) Z_t) + \varepsilon_t^\pi$$
where $\pi_t$ is the inflation, $\pi_t^e$ is the expected inflation, $Y_t$ is the output ...
4
votes
1answer
71 views
How can I calculate with the average of the consumption in an RBC framework?
In the following open-economy RBC model consumption level ($C_t$) is not the most important for the representative households, but the difference of the consumption level and the earlier level of the ...
1
vote
0answers
11 views
What's the ECB share of euro area gov debt?
Where can I see an evolution of the ECB's share in the market for Euro area governmental debt?
I would like to know if there's something similar happening in Euro area as is happening with Fed's ...
3
votes
1answer
133 views
Why the difference in productivity and wage trend in the UK economy?
In reading this article from FT, we come across two graphs:
and
Shouldn't real wages have a similar trend to productivity? Why was there that discrepancy since the 2009 until 2014? Maybe some other ...
0
votes
1answer
63 views
Germany's current account surpluses: Negative effect? How to solve them?
The case for a pernicious persistent current account deficit is easy to build: the home country is borrowing abroad for a long period and that debt may reach a point of becoming unsustainable. There ...
1
vote
0answers
218 views
Macro Economic Factors that Effect the Revenue for General Mills [closed]
I was having a conversation with a friend about politics, and that eventually led to economics. I know... We're a little on the wild side. He made a comment that he thinks that a company like General ...
1
vote
1answer
35 views
In a trade imbalance does the importing country's currency become more valuable?
Suppose that country A buys freely from country B, but B uses steep tarriffs to block its citizens from buying from A. In that case country A's currency will pile up in B.
Other things being equal, ...
2
votes
0answers
241 views
Exchange rate overshooting
Let's consider a Mundell-Fleming model for the short-run, with flexible exchange rates. Now, if we have a monetary contraction (or expansion), the exchange rate path will differ whether we're in the ...
0
votes
1answer
6k views
GNP, GDP, GNI, GNDI and their relationships?
GDP - Gross Domestic Product
GNP - Gross National Product
GNI - Gross National Income
GNDI - Gross National Disposable Income
We know that GNI=GNP, and that GNP=GDP+Net income from factor ...
0
votes
2answers
269 views
What's the role for official intervention in the Balance of Payments?
If the Balance of Payments (BP) is defined as
$$BP=\text{Current Account}+\text{Capital Account}$$
where:
$$\text{Current Account}=X-M+\text{Net Income Interest}$$
and
$$\text{Capital Account}=\...
0
votes
0answers
45 views
Bibliography International Macroeconomics/Finance
I'm looking for some bibliography for International Macroeconomics/Finance. Any suggestions?
Any help would be appreciated.
3
votes
2answers
126 views
The Oil hike of the 2000's: Did it go unnoticed, and why?
I'm reading a macro text book, the authors stated that in the 2000's we witnessed the greatest increase in oil prices ever, even when compared to the 70's oil shocks. To most of us, this fact went a ...
3
votes
0answers
556 views
With a depreciation of real exchange rate, what happens to the trade balance equilibrium output?
Let the real exchange rate $Q=\frac{P^*e}{P}$, where $P^*$ is the 'world' price level (everything with '*' is of the 'world'), $P$ is the domestic price level, and $e =\frac{\text{Home Currency}}{\...
2
votes
2answers
3k views
How do excessive foreign reserves cause inflation?
I have studied that accumulation of foreign reserve has the potential to raise inflation levels in economy as the money base increases (= domestic currency + foreign reserve increases) and if it ...
4
votes
2answers
2k views
What makes the Balance of Payments (BoP) to imbalance?
Theoretically the capital account balance should fully offset the current account balance and the BoP should be zero for any economy. What causes the imbalance or discrepancy in the overall BoP ? What ...
1
vote
1answer
6k views
How does an import quota affect the demand / supply of currency?
An import quota in an open economy might not have the desired affect of increasing the GDP as it increases the demand of domestic currency in the open market raising exchange rate. How does it happen ...
1
vote
0answers
242 views
Money Market, LM curve, starting with a change in Interest Rate
Consider
$$r=r^*+\theta$$
where $r$ is the domestic interest rate, $r^*$ is world interest rate, and $\theta$ is a risk premium and/or expectation rate adjustment.
The economy is small and open, ...
