An Open-Economy Macroeconomic Model

  • Graham Bird


One of the principal trends in economics over recent years has been to place considerable emphasis on the need to examine the various interlinkages that exist between economies, and to move away from models which concentrate on the operation of closed systems. Of course, this is not to argue that conventional macro analysis ignores such interlinkages, indeed many of the older textbooks in macroeconomics and international economics include discussion of concepts such as the foreign trade multiplier. But the presentation of this and related material as ‘open-economy macroeconomics’ is a more recent phenomenon.


Open Economy Current Account National Income Capital Flow Capital Account 
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Notes and References

  1. 1.
    These models are adequately described in most introductory economics textbooks.Google Scholar
  2. 2.
    In a closed economy the ‘paradox of thrift’ occurs where the desire by individuals to increase their saving fails to lead to any increase in aggregate savings since the very act of saving reduces the level of national income which then induces saving to fall.Google Scholar
  3. 3.
    A more rigorous and mathematical presentation of the process described here may be found in many intermediate or advanced texts in international economics.Google Scholar
  4. 4.
    There are numerous books available which survey the various theories of inflation. Readers of this book are encouraged to glance through at least one of these surveys in order to appreciate just how narrow is the analysis of inflation presented here.Google Scholar

Copyright information

© Graham Bird 1987

Authors and Affiliations

  • Graham Bird
    • 1
  1. 1.University of SurreyUK

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