Mych05a - Ch. 5 Saving and investment in an Open Economy...

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Unformatted text preview: Ch. 5 Saving and investment in an Open Economy Overview1111111 Balance of Payment Accounting Goods Market Equilibrium in the open economy Saving and I nvestment for Small and large open economies Policy issues for the open economy 1 Overview I n a globalized world, no national economy is an isolated island. After reviewing the bookkeeping aspect, that extends Ch. 2, we highlight that saving need not equal investment, country by country: trade in goods and services exist; investment / saving and trade are interdependent. Policy implications completes this round, as first approximation with exchange rate to be considered later. 2 Ch. 3 The flow Work & Rest Ch. 4 The stock Now & Then Ch. 5 Home & Abroad Ch. 7 The asset Real & Paper 3 Content Framewo rk Ch. 1: Concept Ch. 2: Structure Balance of Payment Accounting GNP = Y + NFP = (C + G + I + NUT + NX) + NFP = (C + G + I + NUT) + (NX + NFP) = (C + G + I + NUT) + CA {(Y + NFP) (C + G)} = I + NUT + NFP + NX Or, S = I + NUT + NX + NFP S I = (Ut out- Ut in ) + (X M) + (FP out FP in ) America today : (+) + (X M) g + (X 4 CA + KFA = 0 Capital account and Financial account including the sales of stocks, bonds also incoming direct foreign investment as well as changes in foreign reserve assets 5 Saving and I nvestment for Open Economies, Small and Large Assuming NUT...
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This note was uploaded on 03/10/2010 for the course ECON 3140 taught by Professor Mbiekop during the Spring '07 term at Cornell University (Engineering School).

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Mych05a - Ch. 5 Saving and investment in an Open Economy...

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