Policy Choices in an Open Economy: Some Dynamic Considerations

Sven W. Arndt

Chapter 15 in Evolving Patterns in Global Trade and Finance, 2014, pp 207-226 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Decision rules for stabilization policy in an open economy arc examined under alternative specifications of the balance of payments. In particular, distinction between interest-sensitive debt capital and equity capital which responds to an activity variable alters the comparative static properties of instrument assignment. Various aspects of dynamic adjustment are further investigated in a context in which time is endogenous and in which the decision process minimizes a criterion function. It is shown that traditional one-to-one pairing of targets and controls may be inferior to assignment of clusters of instruments to some targets for specified time intervals.

Keywords: Preferential Trade Areas; Fragmentation; Cross-Border Production Networks; Off-Shoring; Currency Areas and Monetary Union; Single vs. Dual-Exchange Rate Regimes; Stabilization Policy in Open Economies; International Monetary Relations (search for similar items in EconPapers)
Date: 2014
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