Contagion: macroeconomic models with multiple equilibria

Article Abstract:

The concept of economic contagion among neighboring countries is examined through a balance of payments model. In examining its causes and dynamics, some features of contagion is difficult to explain when macroeconomic fundamentals are considered. To resolve this difficulty, models which do not presuppose a specific equilibrium mapping between fundamentals and crisis expectations are proposed. The balance of payments model permits the consideration of self-fulfilling devaluation or default expectations and it provides insights into fundamentals such as reserves and external indebtedness.

Research, Models, Analysis, Balance of payments, Asia, International economic relations, Macroeconomics, International finance

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European monetary integration and the demand for money

Article Abstract:

Monetary integration in Europe significantly affects money demand. As monetary unification establishes standard exchange rates and changes the risks and return properties attributed to all financial assets, the money demand will move according to the opportunities offered by the macroeconomic environment. A cash-in-advance model was used to evaluate money demand characteristics. The model assumes that monetary transaction services, and the risk properties of bonds with respect to dissimilar currencies determine money demand.

Intnl Financial Transactions, Europe, Economic policy, Monetary policy, Money demand

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