Intermediate Macroeconomics Lecture 15
Intermediate Macroeconomics Lecture 15
The open economy in the sr The Mundell-Fleming model Model under a floating ex-rate Model under a fixed ex-rate Interest-rate differentials Debate over floating V.s. fixed ex-rate Mundell-Fleming model with changing price level Model in large open economy
The Open Economy in the SR ◼ The Mundell-Fleming Model ◼ Model under a floating ex-rate ◼ Model under a fixed ex-rate ◼ Interest-rate differentials ◼ Debate over floating v.s. fixed ex-rate ◼ Mundell-Fleming model with changing price level ◼ Model in large open economy
The Mundell-Fleming model Robert A Mundell 1999 Nobel price in Economics a. Monetary fiscal policy under different ex-rate regimes b. Optimal currency area Other contribution a. Mundell-Tobin effect b. International trade
The Mundell-Fleming model ◼ Robert A. Mundell 1999 Nobel Price in Economics a. Monetary & fiscal policy under different ex-rate regimes b. Optimal currency area Other contribution: a. Mundell-Tobin effect b. International trade
The Mundell-Fleming model Crucial assumption soe >r=r Components of the model Y=C(Y-D+l(r)+G+ nX(e) M/P=L(, Y
The Mundell-Fleming Model ◼ Crucial assumption: SOE → r = r* ◼ Components of the model Y = C (Y-T) + I (r*) + G + NX (e) M/P=L (r, Y) r = r*
The Mundell-Fleming model 1. The model on a Y---r graph LM IS(e Y
The Mundell-Fleming Model 1. The model on a Y --- r graph r Y IS (e) LM r = r*