Bank Credit, Portfolio Selection, and Macrodynamics in a Small Open Economy

Toshio Watanabe

Metroeconomica, 2025, vol. 76, issue 3, 405-420

Abstract: We propose an open macroeconomic model based on Bernanke and Blinder's credit perspective. We assume a small open economy with imperfect capital movement and substitutes for financial assets under a floating exchange rate system. We represent credit creation mechanisms and investigate the impact of financial factors on the home economy. We find that the difference in relative responses of banks and firms to the profit rate is associated with short‐term economic fluctuations and long‐term economic stability. Finally, we examine the effects of an inflation targeting policy, signifying that the central bank must gain credibility for its monetary policy to achieve stability.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/meca.12491

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:metroe:v:76:y:2025:i:3:p:405-420

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0026-1386

Access Statistics for this article

Metroeconomica is currently edited by Heinz D. Kurz and Neri Salvadori

More articles in Metroeconomica from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().