Abstract

The main linkages among the regions modeled are the endogenous determination of prices and volumes of goods traded and the endogenous determination of exchange rates and interest rates. In this respect, the model is a dynamic version of the Mundell-Fleming model, incorporating many of the extensions to that model that have been developed over the years. That basic framework has proved a useful and robust tool for the analysis of economic policies. The signs of transmission effects of economic policies, and also the magnitudes of their domestic effects, depend on a number of key parameters, including the degree of price stickiness, the elasticity of expenditure with respect to interest rates, the degree of openness to trade, and the size of trade elasticities. Estimates of these key parameters are necessary to evaluate the transmission effects, which are calculated by computer simulation of the model.

A Revised and Extended Model: Occa Paper No.71
  • Amano, Akihiro, Eiji Kurihara, and Lee Samuelson, “Trade Linkage Sub-Model in the EPA World Economic Model,” Economic Bulletin No. 19, Economic Research Institute, Economic Planning Agency, Tokyo, Japan (July 1980).

    • Search Google Scholar
    • Export Citation
  • Argy, Victor, and Joanne Salop, “Price and Output Effects of Monetary and Fiscal Policy Under Flexible Exchange Rates,” Staff Papers, International Monetary Fund (Washington), Vol. 26 (June 1979), pp. 22456.

    • Search Google Scholar
    • Export Citation
  • Artus, Jacques, and Anne McGuirk, “A Revised Version of the Multilateral Exchange Rate Model,” Staff Papers, International Monetary Fund (Washington), Vol. 28 (1981), pp. 275309.

    • Search Google Scholar
    • Export Citation
  • Blanchard, Olivier J., “Debt, Deficits and Finite Horizons,” Journal of Political Economy, Vol. 93 (April 1985), pp. 22347.

  • Branson, William H., and Julio J. Rotemberg, “International Adjustment with Wage Rigidity,” NBER Working Paper, No. 406 (Cambridge, Massachusetts: National Bureau of Economic Research, 1979).

    • Search Google Scholar
    • Export Citation
  • Bruno, Michael, and Jeffrey Sachs, Economics of Worldwide Stagflation (Cambridge, Massachusetts: Harvard University Press, 1985).

  • Bryant, Ralph C., John F. Helliwell, and Peter Hooper, “Domestic and Cross-Border Consequences of U.S. Macroeconomic Policies,” in Macroeconomic Policies in an Interdependent World, ed. by Ralph C. Bryant and others (Washington: International Monetary Fund, 1989) pp. 59115.

    • Search Google Scholar
    • Export Citation
  • Buiter, Willem H., “Death, Birth, Productivity Growth and Debt Neutrality,” Economic Journal, Vol. 98 (June 1988), pp. 27993.

  • Calvo, Guillermo, “Staggered Contracts and Exchange Rate Policy,” in Exchange Rates and International Macroeconomics, ed. by Jacob A. Frenkel (Chicago: University of Chicago Press, 1983), pp. 23552.

    • Search Google Scholar
    • Export Citation
  • Campbell, John Y., and N. Gregory Mankiw, “Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence,” NBER Working Paper, No. 2924 (Cambridge, Massachusetts: National Bureau of Economic Research, 1989).

    • Search Google Scholar
    • Export Citation
  • Chadha, Bankim, and Steven A. Symansky, “Sustainability, Premia, and the Dollar,” paper presented at NBER Conference on Financial Crises, Key Biscayne, Florida, February 28, 1990.

    • Search Google Scholar
    • Export Citation
  • Davidson, James E.H., and David F. Hendry, Frank Srba, and Stephen Yeo, “Econometric Modelling of the Aggregate Time-Series Relationship Between Consumers’ Expenditure and Income in the United Kingdom,” Economic Journal, Vol. 88 (December 1978), pp. 66192.

    • Search Google Scholar
    • Export Citation
  • Edison, Hali J., Marcus H. Miller, and John Williamson, “On Evaluating and Extending the Target Zone Proposal,” Journal of Policy Modeling, Vol. 9 (Spring 1987), pp. 199224.

    • Search Google Scholar
    • Export Citation
  • Frenkel, Jacob A., and Assaf Razin, Fiscal Policies and the World Economy: An Intertemporal Approach (Cambridge, Massachusetts: MIT Press, 1987).

    • Search Google Scholar
    • Export Citation
  • Frenkel, Jacob A., Morris Goldstein, and Paul R. Masson (1988a) “International Coordination of Economic Policies: Scope, Methods, and Effects,” in Wilfried Guth, moderator, Economic Policy Coordination (Washington: International Monetary Fund; Hamburg: HWWA-Institut für Wirtschaftsforschung, 1988), pp. 14992.

    • Search Google Scholar
    • Export Citation
  • Frenkel, Jacob A., Morris Goldstein, and Paul R. Masson (1988b), “International Economic Policy Coordination: Rationale, Mechanisms, and Effects,” paper presented at conference on International Policy Coordination and Exchange Rate Fluctuations, Kiawah Island, South Carolina, October 27–29, 1988. (Forthcoming in a conference volume edited by W.H. Branson, J. Frenkel, and M. Goldstein, University of Chicago Press, 1990.)

    • Search Google Scholar
    • Export Citation
  • Frenkel, Jacob A., Morris Goldstein, and Paul R. Masson (1989a), “International Dimensions of Monetary Policy: Coordination Versus Autonomy,” paper presented at a symposium on Monetary Issues in the 1990s, Jackson Hole, Wyoming, August 30–September 1, 1989. (Forthcoming in a volume published by the Federal Reserve Bank of Kansas City, 1990.)

    • Search Google Scholar
    • Export Citation
  • Frenkel, Jacob A., Morris Goldstein, and Paul R. Masson (1989b), “Simulating the Effects of Some Simple Coordinated Versus Uncoordinated Policy Rules,” in Macroeconomic Policies in an Interdependent World, ed. by Ralph C. Bryant and others (Washington: International Monetary Fund, 1989), pp. 20339.

    • Search Google Scholar
    • Export Citation
  • Gordon, Robert J., “Understanding Inflation in the 1980s,” Brookings Papers on Economic Activity: 1 (1985), The Brookings Institution (Washington), pp. 26399.

    • Search Google Scholar
    • Export Citation
  • Haas, Richard, and Paul Masson, “MINIMOD: Specification and Simulation Results,” Staff Papers, International Monetary Fund (Washington), Vol. 33 (December 1986), pp. 72267.

    • Search Google Scholar
    • Export Citation
  • Helliwell, John, Guy Meredith, Yves Durand, and Philip Bagnoli, “INTERMOD 1.1: A G-7 Version of the IMF’s MULTIMOD,” Economic Modelling (January 1990), pp. 362.

    • Search Google Scholar
    • Export Citation
  • Hendry, David F., and Thomas von Ungern-Sternberg, “Liquidity and Inflation Effects on Consumers’ Expenditure,” in Essays in the Theory and Measurement of Consumer Behaviour: in Honour of Sir Richard Stone, ed. by Angus Deaton (Cambridge: Cambridge University Press, 1981).

    • Search Google Scholar
    • Export Citation
  • Hooper, Peter, Steven Symansky, and Ralph Tryon, “Monetary Policy, Credibility, and International Repercussions: A Qualitative Assessment,” paper presented at Eastern Economic Association Meetings, Baltimore, Maryland, January 1989.

    • Search Google Scholar
    • Export Citation
  • Leiderman, Leonardo, and Assaf Razin, “Testing Ricardian Neutrality with an Intertemporal Stochastic Model,” Journal of Money, Credit, and Banking, Vol. 20 (February 1988), pp. 121.

    • Search Google Scholar
    • Export Citation
  • Masson, Paul, Steven Symansky, Richard Haas, and Michael Dooley, “MULTIMOD—A Multi-Region Econometric Model,” Staff Studies for the World Economic Outlook (Washington: International Monetary Fund, July 1988), pp. 50104.

    • Search Google Scholar
    • Export Citation
  • Masson, Paul R., and John F. Helliwell, “The Effects of Industrial Country Fiscal Policies on Developing Countries in the 1980s,” paper presented at a conference on Fiscal Policy, Montreal, December 6–8, 1989. (Forthcoming in Revista Economica, 1990.)

    • Search Google Scholar
    • Export Citation
  • Masson, Paul R., and Jacques Melitz, “Fiscal Policy Independence in a European Monetary Union,” paper presented at a conference on Exchange Rate Regimes and Currency Unions, Frankfurt, February 21–23, 1990.

    • Search Google Scholar
    • Export Citation
  • Masson, Paul R., and Steven A. Symansky, “Evaluating Policy Rules Under Imperfect Credibility,” paper presented at a conference on Empirical Evaluation of Alternative Policy Regimes, The Brookings Institution, Washington, March 8–9, 1990.

    • Search Google Scholar
    • Export Citation
  • Masson, Paul R., and Ralph W. Tryon, “Macroeconomic Effects of Projected Population Aging in Industrial Countries,” IMF Working Paper, No. 90/5 (Washington: International Monetary Fund, January 1990).

    • Search Google Scholar
    • Export Citation
  • Meredith, G., (1989a) “Expectations, Policy Shocks, and Output Behaviour in a Multi-Country Macroeconomic Model,” paper presented at the Annual Meetings of the Canadian Economics Association, Quebec City, Canada (June 1989).

    • Search Google Scholar
    • Export Citation
  • Meredith, G., (1989b), “INTERMOD 2.0: Model Specifications and Simulation Properties,” Canadian Department of Finance Working Paper No. 89–7 (December 1989).

    • Search Google Scholar
    • Export Citation
  • Taylor, John B., “Aggregate Dynamics and Staggered Contracts,” Journal of Political Economy, Vol. 88 (February 1980), pp. 123.

  • Tobin, James, “A General Equilibrium Approach to Monetary Theory,” Journal of Money, Credit and Banking, Vol. 1 (February 1969), pp. 1529.

    • Search Google Scholar
    • Export Citation
  • Weil, P., “Monetary Policy and Budget Deficits with Overlapping Families of Infinitely-Lived Agents,” (unpublished; Harvard University, 1986).

    • Search Google Scholar
    • Export Citation
  • Wymer, C.R., “Econometric Estimation of Stochastic Differential Equation Systems,” Econometrica, Vol. 40 (May 1972), pp. 56577.