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Monetary Expansion in an Open Economy of Intermediate Size

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  • WILLIAM W. ROBERTS

Abstract

This paper introduces a monetary asset, perceived as an addition to wealth, into a two‐country neoclassical model of accumulation. As domestic monetary expansion changes, demand for the investment good is shifted. This alters the terms and level of trade as well as production and shifts the balanced growth paths of both economies. For a non‐specialized world it is found that an increase in domestic monetary expansion will increase the domestic overall capital intensity, decrease the foreign overall capital intensity, and worsen the terms of trade for the country importing the investment good.

Suggested Citation

  • William W. Roberts, 1978. "Monetary Expansion in an Open Economy of Intermediate Size," The Economic Record, The Economic Society of Australia, vol. 54(3), pages 380-386, December.
    • Handle: RePEc:bla:ecorec:v:54:y:1978:i:3:p:380-386
    DOI: 10.1111/j.1475-4932.1978.tb01639.x
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    References listed on IDEAS

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    1. H. Oniki & H. Uzawa, 1965. "Patterns of Trade and Investment in a Dynamic Model of International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(1), pages 15-37.
    2. Foley, Duncan K & Sidrauski, Miguel, 1970. "Portfolio Choice, Investment and Growth," American Economic Review, American Economic Association, vol. 60(1), pages 44-63, March.
    3. Polly Reynolds Allen, 1972. "Money and Growth in Open Economies," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 39(2), pages 213-219.
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    Cited by:

    1. Y. N. Shieh & A. Takayama, 1980. "Monetary Expansion, Balance of Trade and Economic Growth:Comments and Clarifications," The Economic Record, The Economic Society of Australia, vol. 56(152), pages 94-98, March.
    2. Y. Allen Tso, 1988. "Monetary Expansion, International Trade and Capital Accumulation," The Economic Record, The Economic Society of Australia, vol. 64(2), pages 113-119, June.
    3. Yeung‐Nan Shieh, 1984. "On Monetary Expansion, Terms of Trade and Economic Growth," The Economic Record, The Economic Society of Australia, vol. 60(2), pages 128-132, June.

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