Solving for Country Portfolios in Open Economy Macro Models
Abstract
Open economy macroeconomics typically abstracts from portfolio structure. But the recent experience of financial globalization makes it important to understand the determinants and composition of gross country portfolios. This paper presents a simple approximation method for computing equilibrium financial portfolios in stochastic open economy macro models. The method is widely applicable, easy to implement, and delivers analytical solutions for optimal gross portfolio positions in any combination of types of assets. It can be used in models with any number of assets, whether markets are complete or incomplete, and can be applied to stochastic dynamic general equilibrium models of any dimension, so long as the model is amenable to a solution using standard approximation methods.Download Info
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Bibliographic Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5966.Length:
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:cpr:ceprdp:5966
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Related research
Keywords: country profiles; solution methods;Other versions of this item:
- Michael B. Devereux & Alan Sutherland, 2007. "Solving for Country Portfolios in Open Economy Macro Models," Working Papers 162007, Hong Kong Institute for Monetary Research.
- Michael B. Devereux & Alan Sutherland, 2007. "Solving for Country Portfolios in Open Economy Macro Models," IMF Working Papers 07/284, International Monetary Fund.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-12-09 (All new papers)
- NEP-CBA-2006-12-09 (Central Banking)
- NEP-DGE-2006-12-09 (Dynamic General Equilibrium)
- NEP-MAC-2006-12-09 (Macroeconomics)
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