With a single passive monetary policy, it is possible to ensure determinacy with only one active fiscal policy (Leith and Wren-Lewis, 2006).

Disclaimer Copyright. 12. Here “birth” is the age at which the agent enters the economy as an adult, which is 17.5 years (given that the first age group is defined to cover the age of 15–19). There is no rental market, so households have to buy in order to consume housing services. Open economy wage rates remain above those of closed economy in Low-Income region throughout the century.

E.M. Leeper, C. Leith, in Handbook of Macroeconomics, 2016. Recall that the current account is defined as the difference between aggregate domestic savings and aggregate gross investments in each region. What is an international policy coordination? The foregoing analysis contrasts two polar situations with respect to international trade and the impact of immigration. If a firm with productivity φ supplies market n from country i, the first-order condition for profit maximization again implies that its equilibrium price is a constant mark-up over its delivered marginal cost in that destination: Revenue and profit earned from sales to that destination are: As in the closed economy, An and Bn are proportional indices of market demand in country n; they are functions of sector spending Xn and the CES price index Pn. Find a certified presentation designer for your next project on Prezi Which curve(s) will shift? The difference between these scenarios is driven by the current account balance, partly by the higher interest rates in the closed economy compared to the open economy after 2040 as shown in Figs. Adding equation (15.12) to the model yields a first-order condition for immigrants and one for natives for each age-education group. Share Your Essays.com is the home of thousands of essays published by experts like you! Hence, in autarky, present consumption is relatively more expensive and future consumption relatively less expensive, when comparing with the rest of the world. Currently, enormous volumes of a variety of capital funds are circulating between world economies. Therefore, any change in collateral constraints will have small effects on per-unit house prices. (i) It neither exports goods and services to the foreign countries nor imports goods and services from the foreign countries. In this equilibrium, one country accumulates the debt of another, an outcome whose political equilibrium Sims (1997) argues is unstable. Published by Experts, 5 Suggestions to the Indian Government for Promoting Export and Import of Goods. Dotted lines represent open economy. As discussed in Section 2.2, households in the data hold individual houses instead of such diversified claims. This is because open economies have ‘lie benefit of a wider scope for their profitable application over bigger markets and recovery of huge research costs.

Higher longevity calls for more saving to cover consumption expenditures for a longer retirement period.

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