A Simple Model to Study Global Macroeconomic Interdependence

Rodney Tyers

No 13-23, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: Insights into the international implications of China’s entry to the large economy club and the four-region strategic behaviour that results can be derived from applications of the elemental multi-region, macroeconomic simulation model introduced in this paper. It has a global general equilibrium structure that embodies bilateral linkages between represented regions via both trade and investment. Its behaviour is illustrated with an application to monetary policy following a period of deflationary expectations. Unilateral expansions are shown clearly to have negative real implications for the other large economies whose central banks are forced to respond in kind.

Pages: 33 pages
Date: 2013
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