Portfolio and Macroeconomic Equilibrium in an Open Economy

Giancarlo Gandolfo

Chapter 13 in International Finance and Open-Economy Macroeconomics, 2016, pp 265-310 from Springer

Abstract: Abstract This chapter deals with the problems which arise when capital movements are no longer considered to be pure flows, but flows that derive from stock adjustments. The formulation of these adjustments comes within the framework of the Tobin-Markowitz theory of portfolio equilibrium, extended to an open economy by several scholars. The extension of the theory of portfolio equilibrium to international capital movements can be effected in two principal ways. The first is to see the problem as one of partial equilibrium, that is, by examining how the holders of wealth divide up their wealth among the various national and international assets in a context in which national income, current transactions in the balance of payments, etc., are given by hypothesis, that is to say, are exogenous variables. The second way is to insert the portfolio analysis of capital movements into the framework of macroeconomic equilibrium, in which therefore national income, current transactions, etc., are endogenous variables. One thus obtains a more general and satisfactory model (which can be considered an evolution of the traditional Mundell-Fleming model), but which is also more complicated, because alongside flow equilibria and disequilibria, it is necessary to consider stock equilibria and disequilibria and also the interrelations between stocks and flows over the short and long terms. Both ways are treated in this chapter.

Keywords: Exchange Rate; Fiscal Policy; Rational Expectation; International Reserve; Capital Movement (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:spr:sptchp:978-3-662-49862-0_13

Ordering information: This item can be ordered from
http://www.springer.com/9783662498620

DOI: 10.1007/978-3-662-49862-0_13

Access Statistics for this chapter

More chapters in Springer Texts in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().