Questions tagged [open-economy-macro]

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11
votes
2answers
669 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 ...
6
votes
1answer
104 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 ...
6
votes
1answer
66 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 ...
5
votes
1answer
125 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 ...
5
votes
1answer
176 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 ...
4
votes
1answer
709 views

What is a good proxy for government quality?

Is it ok to use corruption as a proxy for government quality?
4
votes
2answers
144 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 (...
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 ...
4
votes
5answers
308 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 ...
4
votes
1answer
1k 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 ...
4
votes
1answer
76 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 ...
4
votes
0answers
603 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}}{\...
4
votes
0answers
56 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 ...
3
votes
1answer
120 views

Fiscal policy in the Dornbusch model

I'm studying the Dornbusch overshooting model of the exchange rate. Specifically, I'm studying the model presented in a textbook by Copeland (2014). The economy is represented by the following ...
3
votes
2answers
4k 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 ...
3
votes
1answer
94 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 ...
3
votes
1answer
284 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 ...
3
votes
1answer
21 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. ...
3
votes
2answers
127 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
39 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 ...
2
votes
2answers
132 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 ...
2
votes
1answer
71 views

What are some examples of goods that entrepreneurship-intense?

Entrepreneurship is considered to be one of factors of production (the other factors of production are capital, labor and land). According to Heckscher–Ohlin model, a country that has an abundant ...
2
votes
2answers
70 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 (...
2
votes
1answer
170 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 ...
2
votes
0answers
23 views

Difference between IS-LM-UIP and IS-LM-BP models?

My query is regarding the Mundell-Fleming model. I am reading the chapters on open-economy macroeconomics from Blanchard (I am following Blanchard mainly and I have read all the previous chapters). In ...
2
votes
0answers
39 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 & ...
2
votes
0answers
47 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?
2
votes
1answer
265 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 ...
2
votes
0answers
247 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 ...
1
vote
1answer
18 views

Dynamics of interest rates, exchange rates and bond prices within the UIP

There are already a few questions about the workings of the UIP and the exchange rate. What I have basically taken from those discussions is that one always has to distinguish between the spot rate ...
1
vote
1answer
148 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 ...
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, ...
1
vote
1answer
88 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) ...
1
vote
1answer
35 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 ...
1
vote
1answer
8k 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 ...
1
vote
1answer
7k 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
1answer
31 views

Why is the supply curve in the foreign-currency exchange market vertical?

In the book 'Economics' by Mankiw and Taylor the demand and supply curves on the foreign-currency exchange market are shown as follows: The supply equals the Net Capital Outflow (NCO). I would have ...
1
vote
0answers
31 views

Book about monetary union?

do you know any book/manual dealing specifically with monetary unions ? I know economics of monetary union of De Grauwe, but I'm looking for other references. Thank you
1
vote
1answer
29 views

Connection between saving and investments-Y=C+I+G+NX [duplicate]

I understand Y-G+C = I+NX = Savings . The equation that we see everywhere in economic textbooks. I see the mathematical logic. BUT Given that I = capital investment in GDP accounting surely Savings ...
1
vote
0answers
10 views

When a country purchases foreign assets, does it change the Net Capital Outflow?

When a country purchases foreign assets, does it change the Net Capital Outflow? This was a discussion question in my class, and a lot ended up answering that NCO increases, but I'm not so sure. ...
1
vote
1answer
40 views

Why do some researchers include oil price in a VAR model?

Why do some researchers include international oil prices in a VAR model for small open economies? My intuition is that international oil prices cannot be a endogenous variable in the context of a ...
1
vote
0answers
63 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
31 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}^{\...
1
vote
0answers
40 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 ...
1
vote
0answers
56 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 ...
1
vote
0answers
104 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 ...
1
vote
0answers
57 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
0answers
12 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 ...
1
vote
0answers
236 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
0answers
47 views

Bibliography International Macroeconomics/Finance

I'm looking for some bibliography for International Macroeconomics/Finance. Any suggestions? Any help would be appreciated.