Solving for Country Portfolios in Open Economy Macro Models

Alan Sutherland and Michael Devereux

No 5966, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Open economy macroeconomics typically abstracts from portfolio structure. But the recent experience of financial globalization makes it important to understand the determinants and composition of gross country portfolios. This paper presents a simple approximation method for computing equilibrium financial portfolios in stochastic open economy macro models. The method is widely applicable, easy to implement, and delivers analytical solutions for optimal gross portfolio positions in any combination of types of assets. It can be used in models with any number of assets, whether markets are complete or incomplete, and can be applied to stochastic dynamic general equilibrium models of any dimension, so long as the model is amenable to a solution using standard approximation methods.

Keywords: Country profiles; Solution methods (search for similar items in EconPapers)
JEL-codes: E52 E58 F41 (search for similar items in EconPapers)
Date: 2006-11
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (93)

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Related works:
Working Paper: Solving for Country Portfolios in Open Economy Macro Models (2007)
Working Paper: Solving for Country Portfolios in Open Economy Macro Models (2007)
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