Macroeconomic Policy, Exchange-Rate Dynamics, and Optimal Asset Accumulation / Maurice Obstfeld.

Format:

Book

Author/Creator:

Obstfeld, Maurice.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0599.

NBER working paper series no. w0599

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1980.

Summary:

The paper develops a model of exchange-rate and current-account determination for a small economy peopled by infinitely lived, utility-maximizing households. In this setting, a central-bank purchase of foreign exchange has no real effects when central-bank foreign reserves earn interest at the world rate and the proceeds are returned to the public. In contrast, an increase in the monetary growth rate does have real effects, even in the long run. The model developed here implies that an increase in government spending may lead to a surplus on current account. The external adjustment process predicted by the model is one in which consumption, real balances, anti external assets all rise or fall simultaneously.

Notes:

Print version record

December 1980.