Exercises - open economy

Redo the 4 graphical analyzes studied in class to

1. fiscal expansion 2. monetary expansion

in a situation of perfect capital immobility (vertical BP curve) in both cases of (i) fixed and (ii) flexible exchange rates. For each graph, provide a brief description of the economic logic.

Redo the same 4 graphical analyzes

1. fiscal expansion 2. monetary expansion

in a situation of limited capital mobility (steep BP curve)

in both cases of (i) fixed and (ii) flexible exchange rates. For each graph, provide a brief description of the economic logic.

Blanchard chapter 17 number 5

Blanchard chapter 18 issues 2, 4

Consider an IS-LM model in an open economy with perfect capital mobility. The economy described by the following equations is in external equilibrium:

= 160 + 0.69

= 180-1000

=20

= 0.5 -200 =25-0.09-2(/p)

=230

=1

=2

Question: If the central bank defends a nominal exchange rate = 90 what are the equilibrium values of the GDP, the interest rate of the balance on the current account and on the capital account?