scholarly journals Capital Mobility and Devaluation in an Optimizing Model with Rational Expectations

10.3386/w0557 ◽  
1980 ◽  
Author(s):  
Maurice Obstfeld
Keyword(s):  
Capital Mobility ◽  
Rational Expectations ◽  
Optimizing Model

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.

Wage Bargaining, Central Bank Independence, and the Real Effects of Money

1998 ◽  
Vol 52 (3) ◽  
pp. 469-504 ◽  
Author(s):  
Torben Iversen
Keyword(s):  
Monetary Policy ◽  
Capital Mobility ◽  
Rational Expectations ◽  
Time Series Data ◽  
Causal Effect ◽  
Wage Bargaining ◽  
Series Data ◽  
Monetary Policies ◽  
Institutional Settings ◽  
Monetary Regimes

The effects of financial capital mobility on monetary policy autonomy are relatively well understood, but the importance of particular monetary regimes in distinct national-institutional settings is not. This article is a theoretical and empirical exploration of the effects of monetary policy regimes on unemployment in different national wage-bargaining settings. Based on a rational expectations, two-stage game of the interaction between the wage behavior of labor unions and the monetary policies of governments, I argue that monetary policies have real (employment) effects in all but the most decentralized bargaining systems. Specifically, in intermediately centralized bargaining systems a credible government commitment to a nonaccommodating monetary policy rule will deter militant wage behavior with salutary effects on unemployment. In highly centralized systems, by contrast, restrictive monetary policies will clash with unions' pursuit of wage-distributive goals and produce inferior employment performance. Only in highly fragmented bargaining systems is money “neutral” in the sense that employment performance is unaffected by monetary regimes. The model has clear consequences for the optimal design of central banks and collective bargaining arrangements and suggests new ways to study institutional change (hereunder the causal effect of increasingly globalized capital markets). The argument is supported by pooled time-series data for fifteen OECD countries over a twenty-one-year period.

scholarly journals Rational expectations and the effects of financial liberalization on price level and output

2013 ◽  
Vol 10 (1) ◽  
pp. 107-115
Author(s):  
Rangan Gupta
Keyword(s):  
Interest Rates ◽  
Capital Mobility ◽  
Rational Expectations ◽  
Financial Liberalization ◽  
Price Level ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Money Markets ◽  
Reserve Requirements ◽  
Financial Deregulation

This paper develops a generalized short-term model of a small open financially repressed economy, characterized by unorganized money markets, intermediate goods imports, capital mobility, flexible exchange rates and rational expectations, to analyze the price- and output-effects of financial liberalization. The analysis shows that financial deregulation, in the form of increased rate of interest on deposits and higher cash reserve requirements, unambiguously and unconditionally reduces domestic price level, but fails to affect output. Moreover, the result does not depend on the degree of capital mobility. The paper recommends that a small open developing economy should deregulate interest rates and tighten monetary policy if reducing inflation is a priority. Such a policy, however, requires the establishment of a flexible exchange rate regime.

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