Foreigh Asset Accumulation and Macroeconomic Policies

Gong, Liutang and Zou, Heng-fu (2012): Foreigh Asset Accumulation and Macroeconomic Policies.

Abstract

In this paper, we have studies the effects of macroeconomic policies on foreign asset accumulation in a wealth effect model used by Bardhan (1967), Kurz (1968), Calvo (1980) and Blanchard (1983). Our results differ dramatically from the ones in Obstfeld (1981). In particular, we have shown that government spending always reduces foreign asset accumulation (or increases foreign borrowing). While Obstfeld's model turned the conventional Mundell-Fleming model on its head, our wealth effect approach has restored its validity.

• Item Type: MPRA Paper
• Language: English
• Keywords: Foreigh Asset Accumulation; Becker's Time Preference; Macroeconomic Policies
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B22 - Macroeconomics; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy ; Stabilization ; Treasury Policy

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