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WORLD IMBALANCES AND MACROECONOMIC ADJUSTMENTS: A THREE‐COUNTRY STOCK‐FLOW CONSISTENT MODEL WITH FIXED OR FLEXIBLE PRICES
Author(s) -
Mazier Jacques,
TiouTagba Aliti Gnaobodom
Publication year - 2012
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.2011.04141.x
Subject(s) - economics , liberian dollar , float (project management) , fixed exchange rates , monetary economics , exchange rate , stock (firearms) , diversification (marketing strategy) , foreign exchange , interest rate parity , econometrics , business , finance , mechanical engineering , management , marketing , engineering
ABSTRACT World macroeconomic adjustments are analysed with a three‐country Stock‐Flow Consistent (SFC) models. Three SFC models are considered, the first one with a fixed dollar–yuan parity including a version with Chinese foreign reserves' diversification, the second with a flexible dollar–yuan parity which can be freely floating or following a more managed float, the third one being a generalization of the two others with flexible prices instead of constant prices. The fixity of the dollar–yuan parity limits the adjustments facing shocks and world imbalances while a more flexible dollar–yuan exchange rate appears as a powerful adjustment mechanism to reduce these imbalances.