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A theory of current account and exchange rate determinations

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Author Info

  • Aizenman, Joshua

Abstract

The purpose of this paper Is to construct a two-period, two-country model that derives the current account, the exchange rate,the terms of trade, and real interest rates from optimal behavior principles.This is done by constructing a model that uses money mainly as a means of exchange, where the technology of exchange is flexible due to potential substitutability of time and real balances as a means of coordinating transactions. The discussion results in a framework that integrates elements of net saving theories and the monetary approach into a unified structure, in which the two approaches are complementary viewpoints.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 23 (1983)
Issue (Month): 3 (September)
Pages: 261-280

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Handle: RePEc:eee:eecrev:v:23:y:1983:i:3:p:261-280

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Web page: http://www.elsevier.com/locate/eer

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Cited by:
  1. Sebastián Edwards, 2008. "On Current Account Surpluses and the Correction of Global Imbalances," Central Banking, Analysis, and Economic Policies Book Series, in: Kevin Cowan & Sebastián Edwards & Rodrigo O. Valdés & Norman Loayza (Series Editor) & Klaus Schmid (ed.), Current Account and External Financing, edition 1, volume 12, chapter 2, pages 025-083 Central Bank of Chile.
  2. Miller, Preston J. & Todd, Richard M., 1995. "Real effects of monetary policy in a world economy," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 125-153.
  3. Sebastián Edwards, 2007. "On Current Account Surpluses and the Correction of Global Imbalances," Working Papers Central Bank of Chile 440, Central Bank of Chile.
  4. Joshua Aizenman, 1986. "On the Complementarity of Commercial Policy, Capital Controls, and Inflation Tax," Canadian Journal of Economics, Canadian Economics Association, vol. 19(1), pages 114-33, February.
  5. S. Holle & M. Demertzis, 2002. "External Wealth and the Trade Balance: A Time-Series Analysis for the Netherlands," WO Research Memoranda (discontinued) 716, Netherlands Central Bank, Research Department.
  6. Sebastian Edwards, 2007. "On Current Account Surpluses and the Correction of Global Imbalances," NBER Working Papers 12904, National Bureau of Economic Research, Inc.
  7. Preston J. Miller & Richard M. Todd, 1992. "Real effects of monetary policy in a world economy," Staff Report 154, Federal Reserve Bank of Minneapolis.

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