An Open-Economy Macroeconomic Model

Abstract

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.