Economics at your fingertips  

The Valuation Channel of External Adjustment in Small Open Economies

Juan Aquino ()

No 2018-011, Working Papers from Banco Central de Reserva del Perú

Abstract: A common problem in international finance consists of the indeterminacy of the equilibrium asset portfolio in small open economy models. This paper develops a simple approach to compute this portfolio under the assumption of incomplete financial markets. The procedure involves the limiting allocation of a class of two-country world economies where the relative size of one of them tends to zero. Such approach allows to identify the effect of portfolio decisions on the dynamics of the net foreign asset position of a small open economy in a structural fashion. As an illustration, an approximated closed-form solution is obtained for a highly stylized model that is isomorphic to the class of Dynamic Stochastic General Equilibrium (DSGE) models typically used in the literature. JEL Classification: F32. Keywords: net foreign assets, endogenous portfolios, small open economies, DSGE models.

Keywords: net foreign assets; endogenous portfolios; small open economies; DSGE models (search for similar items in EconPapers)
JEL-codes: F32 (search for similar items in EconPapers)
Date: 2018-12
New Economics Papers: this item is included in nep-dge and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) ... -011-2018-ingles.pdf Application/pdf
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

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:

Access Statistics for this paper

More papers in Working Papers from Banco Central de Reserva del Perú Contact information at EDIRC.
Bibliographic data for series maintained by Research Unit ().

Page updated 2022-06-25
Handle: RePEc:rbp:wpaper:2018-011