Open Economy Macroeconomics

Peijie Wang ()
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Peijie Wang: University of Hull, Business School

Chapter 5 in The Economics of Foreign Exchange and Global Finance, 2009, pp 1-18 from Springer

Abstract: The balance of payments examined in the previous chapter is an extension of national accounts in a closed economy to national accounts with an external sector, and deals specifically with the external sector. Therefore, this chapter extends the basic IS-LM analytical framework for a closed economy through incorporating the balance of payments into IS-LM analysis in an open economy, which is particularly helpful and relevant to the Mundell-Fleming model of foreign exchange rate determination, to be introduced in the following chapter. Various assumptions on the attributes of prices adopted by different models for exchange rate determination are presented, providing a background for the study of these models in the later chapters.

Keywords: Interest Rate; Real Exchange Rate; Money Supply; Trade Balance; Private Saving (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1007/978-3-642-00100-0_5

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