The Monetary Approach to the Balance of Payments: Stock-Flow Dynamics, Sticky Wages and Speculative Attacks

Economics, Finance

Wood, Keith Francis

University:University of Glasgow

关键词: Economics, Finance;   

Others  :  http://theses.gla.ac.uk/77325/1/10987105.pdf

来源: University of Glasgow

【 摘 要 】

The essence of the monetary approach to the balance of payments is identified with the stock-flow dynamics that arise from phases of private sector stock adjustment towards a desired long run relationship between assets and expenditures. This stock adjustment behaviour provides the link between monetary and expenditure based analyses of the open economy and demonstrates the consistency of the monetary approach with a model built around a Keynsian (aggregate demand-aggregate supply) structure. The model's dynamics follow from a wealth effect on expenditure and sticky wages, and drive the economy towards an equilibrium with a permanent balance of payments deficit following certain structural changes. A flexible wage version of the model is used to provide an analysis of balance of payments crises within a monetary approach framework. The ongoing reserve loss inevitably collapses the fixed rate regime, precipitated by a speculative attack on reserves. The attack must link the stock-flow dynamics of the fixed regime with the current account-portfolio balance dynamics of the post-collapse regime at a given level of wealth. These dynamics prohibit an analytical solution for the level of wealth that satisfies this condition, and therefore for the time at which the collapse occurs. Simulating both flexible and sticky wage versions of the model provides a solution for the critical level of wealth that links the regimes, and thus for the collapse time.