The Degree of Capital Mobility and the Stability of an Open Economy under Rational Expectations

1982 ◽  
Vol 14 (3) ◽  
pp. 303 ◽  
Author(s):  
Stephen J. Turnovsky ◽  
Jagdeep S. Bhandari
Keyword(s):  
Open Economy ◽  
Capital Mobility ◽  
Rational Expectations ◽  
The Stability

scholarly journals Numerical Exploration of Kaldorian Macrodynamics: Hopf-Neimark Bifurcations and Business Cycles with Fixed Exchange Rates

2007 ◽  
Vol 2007 ◽  
pp. 1-16 ◽  
Author(s):  
Toichiro Asada ◽  
Christos Douskos ◽  
Panagiotis Markellos
Keyword(s):  
Business Cycles ◽  
Exchange Rates ◽  
Parameter Space ◽  
Open Economy ◽  
Capital Mobility ◽  
Complex Dynamics ◽  
Model Parameters ◽  
Bifurcation Curve ◽  
Fixed Exchange Rates ◽  
The Stability

We explore numerically a three-dimensional discrete-time Kaldorian macrodynamic model in an open economy with fixed exchange rates, focusing on the effects of variation of the model parameters, the speed of adjustment of the goods marketα, and the degree of capital mobilityβon the stability of equilibrium and on the existence of business cycles. We determine the stability region in the parameter space and find that increase ofαdestabilizes the equilibrium more quickly than increase ofβ. We determine the Hopf-Neimark bifurcation curve along which business cycles are generated, and discuss briefly the occurrence of Arnold tongues. Bifurcation and Lyapunov exponent diagrams are computed providing information on the emergence, persistence, and amplitude of the cycles and illustrating the complex dynamics involved. Examples of cycles and other attractors are presented. Finally, we discuss a two-dimensional variation of the model related to a “wealth effect,” called model 2, and show that in this case,αdoes not destabilize the equilibrium more quickly thanβ, and that a Hopf-Neimark bifurcation curve does not exist in the parameter space, therefore model 2 does not produce cycles.

scholarly journals A Monetary, Open-Economy Model with Capital Mobility

1992 ◽  
Author(s):  
Don E. Schlagenhauf ◽  
Jeffrey M. Wrase
Keyword(s):  
Open Economy ◽  
Capital Mobility ◽  
Economy Model

scholarly journals Status Preference, Wealth and Dynamics in the Open Economy

2004 ◽  
Vol 5 (3) ◽  
pp. 335-355 ◽  
Author(s):  
Walter H. Fisher
Keyword(s):  
Open Economy ◽  
Capital Mobility ◽  
Critical Role ◽  
Government Expenditure ◽  
Small Open Economy ◽  
Current Account Balance ◽  
Financial Assets ◽  
Transitional Dynamics ◽  
Economy Model ◽  
Interest Rate Shocks

Abstract The implications of status preference in a simple open economy model are investigated in this paper. The open economy is modeled as a continuum of identical representative agents who have preferences over consumption and status. In the paper status is identified as relative wealth, which takes the form of relative holdings international financial assets. A symmetric macroeconomic equilibrium is derived in which status is the source of transitional dynamics for domestic consumption and the current account balance. This result illustrates another way to combine transitional dynamics with interior equilibria in the small open economy Ramsey model with perfect capital mobility. We also show that status preference plays a critical role in influencing the open economy’s adjustment to government expenditure and world interest rate shocks.

STATISTICAL LEARNING WITH TIME-VARYING PARAMETERS

2003 ◽  
Vol 7 (1) ◽  
pp. 119-139 ◽  
Author(s):  
Bruce McGough
Keyword(s):  
Stochastic Process ◽  
Kalman Filter ◽  
Statistical Learning ◽  
Rational Expectations ◽  
Stability Parameter ◽  
Time Varying ◽  
Rational Expectations Equilibrium ◽  
Varying Parameters ◽  
Time Varying Parameters ◽  
The Stability

In their landmark paper, Bray and Savin note that the constant-parameters model used by their agents to form expectations is misspecified and that, using standard econometric techniques, agents may be able to determine the time-varying nature of the model's parameters. Here, we consider the same type of model as employed by Bray and Savin except that our agents form expectations using a perceived model with parameters that vary with time. We assume agents use the Kalman filter to form estimates of these time-varying parameters. We find that, under certain restrictions on the structure of the stochastic process and on the value of the stability parameter, the model will converge to its rational expectations equilibrium. Further, the restrictions on the stability parameter required for convergence are identical to those found by Bray and Savin.

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