Dynamic Analysis Of Open Economies - 1st Edition - ISBN: 9780120589401, 9780323140805

Dynamic Analysis Of Open Economies

1st Edition

Editors: Masanao Aoki
eBook ISBN: 9780323140805
Imprint: Academic Press
Published Date: 28th September 1981
Page Count: 368
Tax/VAT will be calculated at check-out Price includes VAT (GST)
30% off
30% off
30% off
30% off
30% off
20% off
20% off
30% off
30% off
30% off
30% off
30% off
20% off
20% off
30% off
30% off
30% off
30% off
30% off
20% off
20% off
Price includes VAT (GST)
× DRM-Free

Easy - Download and start reading immediately. There’s no activation process to access eBooks; all eBooks are fully searchable, and enabled for copying, pasting, and printing.

Flexible - Read on multiple operating systems and devices. Easily read eBooks on smart phones, computers, or any eBook readers, including Kindle.

Open - Buy once, receive and download all available eBook formats, including PDF, EPUB, and Mobi (for Kindle).

Institutional Access

Secure Checkout

Personal information is secured with SSL technology.

Free Shipping

Free global shipping
No minimum order.


Dynamic Analysis of Open Economies focuses on the dynamic behavior of open economies in general, and dynamic interactions among several interconnected economies in particular. The emphasis is on the techniques of dynamic analysis and on the dynamic responses of models of open economies. This book is organized into three sections and consists of 15 chapters that examine how macroeconomic policy instruments affect open economies under flexible exchange rate regimes and the extent to which interdependence of national economies affects assessment of national policy effectiveness in a dynamic context. The behavior of open economies is analyzed not only at the instant of exogenous shocks or changes in instruments, but also after some time has elapsed since the last impacts. In considering the importance of dynamics, the book describes the behavior of a wide range of models and draws general conclusions. A set of techniques associated with variational analysis and perturbation theory is developed and systematically applied to models of open economies. This section also offers an analytical innovation for dealing with models of the world that are composed of several countries and demonstrates the usefulness of path controllability. The remaining chapters are devoted to models of small open economies and two- and multiple-country models of the world, paying particular attention to monetary policy and its distributional effects. Students and practitioners of applied mathematics and econometrics will find this book extremely helpful.

Table of Contents


Scope of the Investigation


List of Symbols

Part One Analytical Concepts and Tools of Comparative Dynamic Analysis

1 State-Space Representation of Dynamic Models

1.1 Analytical Models

1.2 State-Space Representation

1.3 Notion of Equilibrium and Long-Run Policy Implications

1.4 Example: A Balanced Growth Path of a Small Open Economy

2 Variational Methods in Comparative Dynamic Analysis

2.1 Introduction

2.2 Reference Time Paths

2.3 Variational Equations

2.4 Sensitivity Analysis

3 Variational Dynamic Equation: An Example of Fiscal Policy in a Macroeconomic Model

3.1 Model

3.2 Momentary Equilibrium

3.3 Dynamics

3.4 Long-Run Equilibrium

3.5 Variational Relations: Shifting Momentary Equilibrium

3.6 Variational Dynamics


4 Dynamic Policy Multipliers (Impulse Response Functions)

4.1 Dynamic Multipliers of Continuous Time Models

4.2 Discrete-Time Policy Multiplier

4.3 Multiplier in a Small Open Economy: An Example

5 How to Evaluate Structural Differences: Application of Perturbation Theory

5.1 Basic Procedure

5.2 Structural Perturbation Method

5.3 Choice of State Vectors in Models of Interdependent Economies

5.4 Example: Effects of Trade on National Incomes

6 Controllability and Theory of Economic Policy

6.1 Controllability

6.2 Path Controllability

6.3 Policies with No Spill-Over Effects

6.4 Stabilizability

6.5 Example

7 Linkages of National Economies

7.1 Introduction

7.2 Interest Rate Linkage

7.3 Price Linkages

7.4 Terms-of-Trade Linkage

7.5 Expectations

8 Sources of Dynamics and Their Interactions

8.1 Variational Dynamic Equations

8.2 Example

8.3 Regressive Expectations and Consistency cum Stability

8.4 Example

Part Two Small Open Economies

9 A Growing Economy: Influences of Capital Growth on the Dynamic Multiplier

9.1 The Model

9.2 Fiscal Multipliers

9.3 Numerical Example

9.4 Discussions and Summaries

10 Stabilization Policies in a Small Open Economy

10.1 The Model

10.2 Long-Run Equilibrium

10.3 Variational Differential Equations

10.4 Short-Run Stability of the Variational Dynamics

10.5 Policy Reaction Functions



11 Short-Run Comparative Dynamic Analysis of a Small Open Economy with Variable Wage Rates

11.1 The Model

11.2 Long-Run Equilibrium

11.3 Short-Run Analysis

11.4 Are Variable Wage Rates More Inflationary? An Example of Structural Perturbation Analysis

11.5 Numerical Examples

11.6 Elaborations

Appendix The Variational Disposable Income Expression

Part Three Multiple-Country Models of the World

12 Two-Country Model: A Preliminary Analysis

12.1 Implications of Structural Differences

12.2 Distributional Effects of Monetary Policies

13 Monetary Policies in a Two-Country Model of the World

13.1 Introduction

13.2 Structural Perturbation Analysis

13.3 Policy Sensitivity and Distributional Effects

13.4 The Model

13.5 Reduced Form Equations of the Reference Variational Model VMo

13.6 Dynamics of the Reference Model

13.7 Dynamics of VM

13.8 Policy Effects

13.9 Elaborations on the Basic Model

13.10 Numerical Examples

Appendix Calculation of the Averages and the Differences

14 Two-Country Model of the World under Key Currency Regime

14.1 Introduction

14.2 The Model

14.3 Variational Dynamics

14.4 Stability Analysis under Rigid Wage Rates

14.5 Stability: Flexible Wage Rates

14.6 Elaborations on the Basic Model




15 Interdependence in a Three-Country Model

15.1 Introduction

15.2 The Model

15.3 Benchmark Model

15.4 Nonsymmetrical Model: Distributional Effects of Instruments

15.5 Nonsymmetrical Model: Monetary Union


A Dynamic Multipliers of ARMA Model

B Disposable Income Calculation

C Regressive Expectations and Perfect Foresight Assumption

D Short-Run Stability of Variational Equations

E Calculation of the Transition Matrix

F Perturbation Analysis of Matrix Exponential Functions




No. of pages:
© Academic Press 1981
Academic Press
eBook ISBN:

About the Editor

Masanao Aoki

Affiliations and Expertise

School of Engineering and Applied Science, University of California, Los Angeles, U.S.A.