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TWO-COUNTRY STOCK-FLOW-CONSISTENT MACROECONOMICS GODLEY AND LAVOIE MONETARY ECONOMICS 2007 CHAPTER 12 AND AFTER

Outline. Notes on the open economy model, in particular price elasticities of exports and importsExperiments in two closures: What happens when domestic exports fall exogenously:In the fixed exchange rate regime with endogenous foreign reservesIn the flexible exchange rate regime. A complex mode

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TWO-COUNTRY STOCK-FLOW-CONSISTENT MACROECONOMICS GODLEY AND LAVOIE MONETARY ECONOMICS 2007 CHAPTER 12 AND AFTER

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    1. TWO-COUNTRY STOCK-FLOW-CONSISTENT MACROECONOMICS GODLEY AND LAVOIE MONETARY ECONOMICS (2007) CHAPTER 12 AND AFTER

    2. Outline Notes on the open economy model, in particular price elasticities of exports and imports Experiments in two closures: What happens when domestic exports fall exogenously: In the fixed exchange rate regime with endogenous foreign reserves In the flexible exchange rate regime

    3. A complex model with several endogenous variables Import prices, export prices, domestic sales deflator, GDP deflator, (exchange rate); Exports, imports, output, consumption, domestic sales, disposable income Taxes, interest payments, money stock, holdings of bills and money (portfolios), wealth Trade balance, current account balance, capital account balance, (foreign reserves)

    4. … but still elementary model The simplifying assumptions are enormous. There is no domestic or foreign investment in fixed or working capital No holdings of financial assets by firms; No wage inflation No commercial banking No “hot money”. The treatment of expectations is rudimentary.

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