Real and Financial Sector Interaction Under Liberalization in an Open Developing Economy
A short-run model incorporates instantaneous portfolio equilibrium with macroeconomic flows to clarify the structure of real-financial sector interactions. If equity and foreign exchange markets are introduced in structuralist theories of asset markets in developing countries, the key result that a fall in money supply raises the rate of inflation now holds only under special conditions on partial derivatives. But there is a tendency for interest rates to rise and for fluctuations in asset prices. Fuller integration of asset markets moderates these fluctuations. Outcomes are stable in spite of the generalized complementarity distinguishing equity markets from loan markets. Expectations play a major role. Implications for policy are to link domestic interest rates to foreign, remove artificial barriers to market integration, and stimulate demand as well as supply.
(This abstract was borrowed from another version of this item.)
Volume (Year): 51 (2000)
Issue (Month): 3 (08)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0026-1386|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0026-1386|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert J. Barro, 1972. "A Theory of Monopolistic Price Adjustment," Review of Economic Studies, Oxford University Press, vol. 39(1), pages 17-26.
- Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834.
- Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
- Ashima Goyal, 1995. "The Simple Analytics of Aggregate Supply Demand and Structural Adjustment," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 30(2), pages 167-186, July.
- Goyal, A., 1992.
"Growth Dynamics : In a General Equilibrium Macroeconomic Model for India,"
69, Indira Gandhi Institute of Development Research-.
- Goyal, Ashima, 1994. "Growth dynamics in a general equilibrium macroeconomic model for India," Journal of Policy Modeling, Elsevier, vol. 16(3), pages 265-289, June.
- Goyal, Ashima, 1994. "Growth Dynamics in a General Equilibrium Macroeconomic Model for India," MPRA Paper 72155, University Library of Munich, Germany.
- Ashima Goyal, 1997. "Sticky Relative Prices, Dynamics, and the Closure Debate," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 19(2), pages 195-224, January.
- van Wijnbergen, Sweder, 1983. "Credit policy, inflation and growth in a financially repressed economy," Journal of Development Economics, Elsevier, vol. 13(1-2), pages 45-65.
- Van Wijnbergen, S., 1983. "Interest rate management in LDC's," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 433-452, September.
- Shleifer, Andrei & Summers, Lawrence H, 1990. "The Noise Trader Approach to Finance," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 19-33, Spring.
When requesting a correction, please mention this item's handle: RePEc:bla:metroe:v:51:y:2000:i:3:p:257-283. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.