Book contents
- Frontmatter
- Contents
- Preface
- PART 1 OVERVIEW
- PART 2 A BENCHMARK MACROECONOMIC MODEL FOR AN EMERGING ECONOMY
- 2 Equilibrium in the Domestic Labor and Goods Markets
- 3 Equilibrium in Financial Markets
- 4 Short-Run Macroeconomic Equilibrium
- 5 Medium-Term Macroeconomic Equilibrium
- PART 3 PUBLIC FINANCE AND MACROECONOMIC PERFORMANCE
- PART 4 THE FINANCIAL SECTOR AND MACROECONOMIC PERFORMANCE
- PART 5 EXCHANGE RATE MANAGEMENT
- References
- Index
2 - Equilibrium in the Domestic Labor and Goods Markets
Published online by Cambridge University Press: 04 December 2009
- Frontmatter
- Contents
- Preface
- PART 1 OVERVIEW
- PART 2 A BENCHMARK MACROECONOMIC MODEL FOR AN EMERGING ECONOMY
- 2 Equilibrium in the Domestic Labor and Goods Markets
- 3 Equilibrium in Financial Markets
- 4 Short-Run Macroeconomic Equilibrium
- 5 Medium-Term Macroeconomic Equilibrium
- PART 3 PUBLIC FINANCE AND MACROECONOMIC PERFORMANCE
- PART 4 THE FINANCIAL SECTOR AND MACROECONOMIC PERFORMANCE
- PART 5 EXCHANGE RATE MANAGEMENT
- References
- Index
Summary
This chapter and the next will develop an analytical framework (a “model”) that can be used to study short-run macroeconomic issues in a “representative” emerging-market economy. This model will differ from standard textbook treatments of short-run industrial-country macroeconomics in a variety of ways. First, the model will feature “real” as well as financial openness to trade with the rest of the world. “Real” openness – openness to the exchange of goods and services with the rest of the world – is an important feature of the vast majority of developing economies, and the effects of financial openness on domestic macroeconomic performance in emerging economies will be one of our main concerns throughout this book. Second, in contrast to what is typically done in the industrial-country context, the model will assume that the economy under study maintains an officially determined exchange rate regime, which again is true of many emerging markets. In this context, we will examine the use of the exchange rate as a policy instrument. Finally, the allocation of emphasis between fiscal and monetary policies will be somewhat different from what is typical in industrial-country applications. Because the key player in the formulation of countercyclical policies in emerging economies tends to be the central bank, rather than the government, the model developed in this part of the book will focus heavily on the effects of monetary instruments of stabilization, including central bank intervention in foreign exchange markets as well as in domestic securities markets.
- Type
- Chapter
- Information
- Macroeconomics in Emerging Markets , pp. 23 - 41Publisher: Cambridge University PressPrint publication year: 2003