The balance of payments examined in the previous chapter is an extension of national accounts in a closed economy to national accounts with an external sector, and deals specifically with the external sector. Therefore, this chapter extends the basic IS-LM analytical framework for a closed economy through incorporating the balance of payments into IS-LM analysis in an open economy, which is particularly helpful and relevant to the Mundell-Fleming model of foreign exchange rate determination, to be introduced in the following chapter. Various assumptions on the attributes of prices adopted by different models for exchange rate determination are presented, providing a background for the study of these models in the later chapters.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2009 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Wang, P. (2009). Open Economy Macroeconomics. In: The Economics of Foreign Exchange and Global Finance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-00100-0_5
Download citation
DOI: https://doi.org/10.1007/978-3-642-00100-0_5
Published:
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-00106-2
Online ISBN: 978-3-642-00100-0
eBook Packages: Business and EconomicsEconomics and Finance (R0)