ABSTRACT
The aim of the first three chapters in this part is to underpin the theoretical framework for much of the analysis that follows in the subsequent chapters. This chapter presents a model that is basically neo-Keynesian in spirit while the two chapters that follow present models which, by contrast, are monetarist in spirit. These three chapters together serve to provide a representative sample of the kinds of macro-models that have been variously used in the postwar years. Chapter 14 then looks at issues arising out of the models and some evidence bearing on the choice between some of these models. Notation used in this chapter
Ar |
= |
real absorption |
B |
= |
balance of payments |
D |
= |
domestic assets of the central bank |
E |
= |
exchange rate (units of domestic currency per unit of foreign currency) |
edm |
= |
elasticity of demand for imports |
edx |
= |
elasticity of demand for exports |
FC |
= |
value of foreign assets in foreign currency held by residents |
Gr |
= |
real government expenditure |
K |
= |
net capital flows |
M |
= |
volume of imports |
Mo |
= |
money supply |
P |
= |
overall price level (composed of domestic and foreign-produced goods) |
Pd |
= |
domestic price level |
Pf |
= |
foreign prices denominated in foreign currency |
r |
= |
domestic interest rate |
rf |
= |
foreign interest rate |
W |
= |
nominal wage rate |
We |
= |
domestic wealth |
X |
= |
volume of exports |
Yf |
= |
foreign real GNP |
Yr |
= |
real GNP |
Yr d |
= |
real aggregate demand for domestic goods |