An Expanded Graphical Representation of the Portfolio Balance Model of Exchange Rate Determination

Joachim Zietz

The American Economist, 1994, vol. 38, issue 2, 52-57

Abstract: The traditional one-diagram representation of the portfolio balance model gets high marks for conciseness and efficiency but falls short in providing an intuitive understanding of the forces that drive the model. This paper offers an expanded graphical representation of the model. It features a diagram for each of the three assets considered by the portfolio balance model, domestic bonds, foreign bonds, and domestic money. The purpose is to make the economic adjustments that are taking place in the model's markets more intuitively obvious.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:sae:amerec:v:38:y:1994:i:2:p:52-57

DOI: 10.1177/056943459403800206

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