How Constraining is Capital Mobility? The Partisan Hypothesis in an Open Economy

1999 ◽  
Vol 43 (4) ◽  
pp. 1003 ◽  
Author(s):  
Thomas Oatley
Keyword(s):  
Open Economy ◽  
Capital Mobility

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.

scholarly journals Wage rigidity and capital mobility in an optimizing model of a small open economy

De Economist ◽  
1989 ◽  
Vol 137 (1) ◽  
pp. 47-75
Author(s):  
Th. van de Klundert ◽  
F. van der Ploeg
Keyword(s):  
Open Economy ◽  
Capital Mobility ◽  
Small Open Economy ◽  
Wage Rigidity ◽  
Optimizing Model

Capital Mobility, Consumption Substitutability and the Effects of Monetary Policy in Open Economies

2005 ◽  
Vol 6 (1) ◽  
pp. 79-94 ◽  
Author(s):  
Christian Pierdzioch
Keyword(s):  
Monetary Policy ◽  
General Equilibrium ◽  
Open Economy ◽  
Capital Mobility ◽  
International Capital ◽  
International Capital Mobility ◽  
Short Run ◽  
Cross Country ◽  
Optimizing Model ◽  
The Impact

Abstract I use a dynamic general equilibrium two-country optimizing model to analyze the implications of international capital mobility for the short-run effects of monetary policy in an open economy. The model implies that the substitutability of goods produced in different countries plays a central role for the impact of changes in the degree of international capital mobility on the effects of monetary policy. Paralleling the results of the traditional Mundell-Fleming model, a higher degree of international capital mobility magnifies the short-run output effects of monetary policy only if the Marshall-Lerner condition, which is linked to the cross-country substitutability of goods, holds.

scholarly journals Financial liberalisation and inflationary dynamics in the context of a small open economy

2014 ◽  
Vol 9 (1) ◽  
pp. 89-101
Author(s):  
R Gupta
Keyword(s):  
Open Economy ◽  
Capital Mobility ◽  
Small Open Economy ◽  
Capital Account ◽  
Short Term ◽  
Money Markets ◽  
Reserve Requirements ◽  
Low Degree ◽  
Financial Liberalisation ◽  
High Degree

This paper develops a short-term model of a small open financially repressed economy characterised by unorganised money markets, intermediate goods imports, capital mobility and flexible exchange rates. The analysis shows that financial liberalisation, in the form of increased rate of interest on deposits and tight monetary policy, causes deflation for an economy with a high degree of capital mobility. However, for economies with a low degree of capital mobility, the possibility of stagflation cannot be ruled out. These results suggest that financial liberalisation in the form of lower reserve requirements should be recommended for economies with restricted transactions in the capital account.

Interest rate rules and equilibrium (in)determinacy in a small open economy: the role of internationally traded capital

2018 ◽  
Vol 18 (2) ◽  
Author(s):  
Wen-ya Chang ◽  
Hsueh-fang Tsai ◽  
Juin-jen Chang ◽  
Hsieh-yu Lin
Keyword(s):  
Interest Rate ◽  
Open Economy ◽  
Capital Mobility ◽  
Small Open Economy ◽  
International Capital ◽  
Interest Rate Rules ◽  
International Capital Mobility ◽  
Rate Feedback ◽  
Feedback Rule

Abstract This study develops a small-open-economy version of Benhabib, J., S. Schmitt-Grohé, and M. Uribe. 2001. “Monetary Policy and Multiple Equilibria.” American Economic Review 91: 167–186. We systematically explore the role of international capital mobility and the portfolio balance channel in terms of macroeconomic (in)stability when the government follows a commonly-adopted interest-rate feedback rule. In a one-traded-good model, the steady-state equilibrium, in general, is locally determinate; international capital mobility stabilizes the economy against business cycle fluctuations under a simple interest-rate feedback rule. In a two-good (traded and non-traded goods) model, the relationship between equilibrium (in)determinacy and the aggressiveness of interest rate rules is not monotonic, and crucially depends on households’ portfolio preferences. These results suggest that a unified interest rate rule can end up with very different consequences of macroeconomic (in)stability in an open economy from those in a closed economy.

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