Year: 1984
Type: report
Abstract: This paper analyzes the effects of various disturbances of domestic and foreign origin in a small open economy under imperfect capital mobility in which the behavioral relationships are derived from optimization by the private sector.In this model the domestic economy jumps instantaneously to its new equilibrium following a change in either the domestic monetary growth rate or domestic fiscal policy.In response to a disturbance in either the foreign interest rate or inflation rate, the economy undergoes an initial partial jump towards its new equilibrium, which it thereafter approaches gradually.The implications of these results for exchange rate adjustment and the insulation properties of flexible exchange rates are discussed.
DOI: 10.3386/w1407
Author: Stephen Turnovsky
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2071332844