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The Mark III International Transmission Model

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  • Michael R. Darby
  • Alan C. Stockman

Abstract

This paper presents a summary and estimates of the Mark III International Transmission Model, a quarterly macroeconometric model of the United States, United Kingdom, Canada, France, Germany, Italy, Japan, and the Netherlands estimated for 1957 through 1976. The model is formulated to test and measure the empirical importance of alternative channels of international transmission including the effects of capital and trade flows on the money supply, of export shocks on aggregate demand, of currency substitution on money demand, and of variations in the real price of oil. Major Implications of the model estimates are:(1) Countries linked by pegged exchange rates appear to have much more national economic independence than generally supposed. (2) Substantial or complete sterilization of the effects of contemporaneous reserve flows on the money supply is a universal practice of the nonreserve central banks. (3) Quantities such as international trade flows and capital flows are not well explained by observed prices, exchange rates, and interest rates. (4) Explaining real income by innovations inaggregate demand variables works well for U.S. real income but does not transfer easily to other countries. The empirical results suggest a rich menu for further research.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0462.

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Date of creation: Mar 1980
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Publication status: published as The Mark III International Transmission Model: Specification , Michael R. Darby, Alan C. Stockman. in The International Transmission of Inflation , Darby, Lothian, Gandolfi, Schwartz, and Stockman. 1983
Handle: RePEc:nbr:nberwo:0462

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  1. Barro, Robert J, 1978. "Unanticipated Money, Output, and the Price Level in the United States," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 549-80, August.
  2. Jack Carr & Michael R. Darby, 1977. "The Role of Money Supply Shocks in the Short-Run Demand for Money," UCLA Economics Working Papers 098, UCLA Department of Economics.
  3. Darby, Michael R, 1976. "Rational Expectations under Conditions of Costly Information," Journal of Finance, American Finance Association, vol. 31(3), pages 889-95, June.
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Cited by:
  1. Carr, Jack & Darby, Michael R., 1981. "The role of money supply shocks in the short-run demand for money," Journal of Monetary Economics, Elsevier, vol. 8(2), pages 183-199.
  2. Darby, Michael R, 1982. "The Price of Oil and World Inflation and Recession," American Economic Review, American Economic Association, vol. 72(4), pages 738-51, September.
  3. Sebastian Edwards, 1983. "Money, the Rate of Devaluation and Interest Rates in a Semi-Open Economy: Columbia 1986-1982," UCLA Economics Working Papers 316, UCLA Department of Economics.
  4. Obstfeld, Maurice, 1983. "Exchange rates, inflation, and the sterilization problem: Germany, 1975-1981," European Economic Review, Elsevier, vol. 21(1-2), pages 161-189.
  5. Jaime R. Marquez, 1985. "Money demand in open economies : a currency substitution model for Venezuela," International Finance Discussion Papers 265, Board of Governors of the Federal Reserve System (U.S.).

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