Monetary Policy, Investment Dynamics, And The Intertemporal Approach To The Current Account
This paper applies the intertemporal approach to the current account to the case of monetary shocks. A two-country dynamic general equilibrium model with predetermined wages is proposed as a means to bridge the gap between Mundell-Fleming and modern intertemporal models. Early versions of Mundell-Fleming implied that a monetary expansion must necessarily improve the current account; the alternative result became a possibility in more contemporary versions when intertemporal features were introduced into the asset market. The present model suggests that when intertemporal features are also introduced into the other markets of the economy, the model''s prediction is transformed yet further. A calibrated version of the model suggests a beggar-thy-neighbor improvement in the current account becomes unlikely for reasonable parameter values.
|Date of creation:||09 Jan 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (530) 752-0741
Fax: (530) 752-9382
Web page: http://www.econ.ucdavis.edu
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:cda:wpaper:97-13. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Scott Dyer)
If references are entirely missing, you can add them using this form.