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Questions tagged [open-economy-macro]

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14 views

interest rate and foreign portfolio invetsment flows

I understand that foreign investors would invest in a country with a higher interest rate than home country due to the higher expected returns. However, why would foreign investors invest in stock ...
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2answers
37 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 (...
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Are goods and services not assets in NCO definition?

In Mankiw's Principle of Economics, net capital outflow = purchase of foreign assets by domestic residents - purchase of domestic assets by foreigners. And also, NCO = NX (net export). But if we ...
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13 views

How will Trump’s tariffs affect North Korea?

How will Trump’s tariffs affect North Korea? Do tariffs mainly worsen the condition of the North Korean economy?
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1answer
18 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. ...
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1answer
30 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 ...
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15 views

Open economy doubt

Why is the LM relation unaffected in the open economy ?( Blanchard says that LM is unaffected in chapter 20 of his book 'Macroeconomics). With an increase in demand for domestic currency as an economy ...
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1answer
100 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 ...
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577 views

What exactly is the XX curve in the DD-AA model?

This is a short run analysis 1) What exactly is the XX curve? Is it the desired CA level? 2) Why is the XX curve flatter than the DD curve? Say on a point on the DD curve above the equilibrium level,...
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11 views

What type of collateral do firms in emerging markets use when borrowing from international lenders?

The literature in international finance assumes that firms can issue bonds and borrow up to some multiple of their own physical capital (see most small open economy models with financial frictions) ...
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5 views

Under what circumstances can the accumulation of large external debts exacerbate the threat of a large and prolonged current account deficit?

An article by the IMF, when talking about the easing of restrictions on capital outflows, says "...in countries that have accumulated large external debts, such changes could exacerbate the threat of ...
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1answer
34 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 ...
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2answers
57 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 ...
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1answer
159 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 ...
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0answers
63 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 ...
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1answer
124 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 ...
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0answers
28 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. ...
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2answers
78 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 ...
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1answer
54 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 ...
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0answers
10 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 ...
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1answer
67 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 ...
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1answer
58 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 ...
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0answers
178 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 ...
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1answer
31 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, ...
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0answers
174 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 ...
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1answer
2k 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 ...
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2answers
147 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}=\...
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42 views

Bibliography International Macroeconomics/Finance

I'm looking for some bibliography for International Macroeconomics/Finance. Any suggestions? Any help would be appreciated.
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2answers
91 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 ...
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0answers
311 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}}{\...
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2answers
2k 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
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2answers
769 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 ...
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1answer
5k 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 ...
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164 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, ...
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1answer
80 views

How would a foreign trade multiplier behave if imports depended only on exchange rates?

I was wandering if the amount of imports and exports in an economy depended only on the exchange rates then what would the foreign trade multiplier of this economy look like ?
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5answers
151 views

Where are the payments for export in the balance of payment?

I know that when we sell some goods abroad, we credit Goods&Services part within Trade balance, which is a part of Current Account. What part of the Financial Account is debited with the sum ...
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0answers
28 views

The coming US interest rates rise by the Fed. Will it affect the european bonds?

Recently, or maybe not so recently, there has been talk of the Fed going to enter in cycle of raising the interest rates. When interest rates are expected to be risen in the future, bonds with long-...
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1answer
52 views

Stiglitz: movement capital vs labor, effect on living standars

Stiglitz argues that increasing free movement of labor would be a much more effective way of increasing living standards, compared to free movement of capital (see for instance this video). Does ...
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1answer
138 views

Can anyone give me some reference on Mundell-Fleming model estimated empirically?

In virtually all texts of intermediate Macroeconomics$^1$ the Mundell-Fleming model is taught. But his estimate is not addressed in the classical texts of econometrics. I've always wanted to read some ...
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2answers
120 views

GMM Estimation of a parameter from Intratemporal Euler of capital constraints

I'm trying to estimate $\lambda$ from this intratemporal Euler equation: $\left[ \dfrac{C_t^{-\sigma}}{C_t^{*-\sigma}} \dfrac{P_t}{S_t P_t^*} \right]^{\lambda} \left[ \dfrac{\bar{P_t} Y_t - \Delta (...
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0answers
51 views

How exactly do Participatory Notes induce volatility into the economy?

I was reading up on participatory notes. Wikipedia defines these as "instruments issued by registered foreign institutional investors (FII) to overseas investors, who wish to invest in the Indian ...
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1answer
141 views

Is Dollarization a good decision for a small open economy with an economic cycle that weakly correlates with the anchor country?

I have been reading the work of Alesina http://scholar.harvard.edu/files/alesina/files/dollarization.pdf, about the pros and cons of dollarization (i.e. adopting the currency of other country, say the ...
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1answer
90 views

Uncovered interest parity and asymmetric capital controls

To derive the uncovered interest parity (UIP) condition we assume, among other things, that there is free movement of capital across countries. But this cannot be directly applied to India because of ...
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2answers
560 views

Effect of a permanent increase in government expenditure in an open economy?

In Krugman & Obstfeld's International Economics, 8e, Chapter 16, an involved argument is given showing that a permanent fiscal expansion will not affect output even in the short run. It seems to ...