Le modèle Mundell-Fleming: Au cœur de la macroéconomie internationale ( Culture économique t. 7) (French Edition) – Kindle edition by Jean Blaise Mimbang. 17 juil. traditionnel de Mundell-Fleming a ensuite souligné la dichotomie . () a par exemple proposé récemment, le critère d’homogénéité des. View Notes – Chapitre 4 – from ECONOMIE at Université de Nantes. Modle de Mundell-Fleming IS-LM en conomie ouverte A partir du modle de.

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The Mundell—Fleming model applied to a small open economy facing perfect capital mobility, in which the domestic interest rate is exogenously determined by the world interest rate, shows stark differences from the closed economy model. Under flexible exchange ratesthe exchange rate is the third endogenous variable while BoP is set equal to zero.

The BoP curve shifts down, foreign money flows in and the home currency is pressured to appreciate, so the central bank offsets the pressure by selling domestic currency equivalently, buying foreign currency.

Whereas the traditional IS-LM model deals with economy under autarky or a closed economythe Mundell—Fleming model describes a small open economy. Basic assumptions of the model are as follows: The inflow of money causes the LM curve to shift to the right, and the domestic interest rate becomes lower as low as the world interest rate if there is perfect capital mobility. But under fixed exchange rates, the money supply in the short run at a given point in time is fixed based on past international money flows, while as the economy evolves over time these international flows cause future points in time to inherit higher or lower but pre-determined values of the money supply.

An increase in money supply shifts the LM curve to the right.

Modèle OG-DG — Wikipédia

Reprinted in Mundell, Robert A. In a system of flexible exchange rates, central banks allow the exchange rate to be determined by market forces alone. The Mundell—Fleming model under a fixed exchange rate regime also has completely different implications from those of the closed economy IS-LM model. Journal of International Economics. Thus net payments flows into or out of the country need not equal zero; the exchange rate e is exogenously given, while the variable BoP is endogenous.

However, this increase in the interest rates attracts foreign investors wishing to take advantage of the higher rates so they demand the domestic currency therefore it appreciates. The denominator is positive, and the numerator is positive or negative.

The IS curve is downward sloped and the LM ee is upward sloped, as in the closed economy IS-LM analysis; the BoP curve is upward sloped unless there is perfect capital mobility, in which case it is horizontal at the level of the world interest rate. The reason is that a large open economy has the characteristics of both an autarky and a small open economy.


The strengthening of fpeming currency will mean it is more expensive for domestic producers to export so net mdole will decrease therefore cancelling out the rise in government mundelo and shifting the IS curve to the left.

Higher lagged income or a lower real interest rate leads to higher investment spending. Any exogenous changes affecting the IS curve such as government spending changes will be exactly offset by resulting exchange rate changes, and the IS curve will end up in its original position, still intersecting the LM and BoP curves at their intersection point.

Investment and consumption increase as the interest rates decrease, and currency depreciation improves the trade balance. Retrieved from ” https: An increase in government expenditure shifts the IS curve to the right. Development Growth Monetary Political economy. Higher disposable income or a lower real interest rate nominal interest rate minus expected inflation leads to higher consumption spending. If the global interest rate increases, shifting the BoP curve upward, capital flows out to take advantage of the opportunity.

An increase in the global interest rate shifts the BoP curve upward and causes capital flows out of the local economy.

Increased government expenditure shifts the IS curve to the right. To maintain the fixed exchange rate, the central bank must accommodate the capital flows in or out which are caused by a change of the global interest rate, in order to offset pressure on the exchange rate.

If there is pressure to devalue the domestic currency’s exchange rate because the supply of domestic currency exceeds its demand in foreign exchange markets, the local authority buys domestic currency with foreign currency to decrease the domestic currency’s supply in the foreign exchange market. Again, this keeps the exchange rate at its targeted level.

However, the exchange rate is controlled by the local monetary authority in the framework of a fixed exchange rate system. However, in reality, the world interest rate is different from the domestic rate. Mundell’s paper suggests that the model can be applied to Zurich, Brussels and so on. Under flexible exchange rates, the nominal money supply is completely under the control of the central bank. That being said, capital outflow will increase which will lead to a decrease in the real exchange rate, ultimately shifting the IS curve right until interest rates equal global interest rates assuming horizontal BOP.


Fiscal Monetary Commercial Central bank Petrodollar recycling. In the IS-LM model, the domestic interest rate is a key component in keeping both the money market and the goods market in equilibrium. Under less than perfect capital mobility, the depreciated exchange rate shifts the BoP curve somewhat back down.

In the closed economy model, if the central bank expands the money supply the LM curve shifts out, and as a result mujdell goes up and the domestic interest rate goes down. Reprinted in Cooper, Richard N.

The accommodated monetary outflows exactly offset the intended rise in the domestic money supply, completely offsetting the tendency of the LM curve to shift to the right, and the interest rate remains equal to the world rate of interest. This keeps the domestic currency’s exchange rate at its targeted level.

Mundell–Fleming model

Under perfect capital mobility, the BoP curve is always horizontal at the level of the world interest rate. Under the fixed exchange rate system, the central bank operates in the foreign exchange market to maintain a specific exchange rate. Views Read Edit View history. Therefore, the flemihg in government spending will have no effect on the national GDP or interest rate.

The central bank under a fixed exchange rate system would have to instantaneously intervene by selling foreign money in exchange for domestic money to maintain the exchange rate. However, under perfect capital mobility the BoP curve is simply horizontal at a level of the domestic interest rate equal to the level of the world interest rate. One of the assumptions of the Mundell—Fleming model is that domestic and foreign securities are perfect substitutes.

But in the Mundell—Fleming open economy model with perfect capital mobility, monetary policy becomes ineffective. If the central bank were to conduct open market operations in the xe bond market in order to offset these balance-of-payments-induced changes modpe the money supply — a process called sterilizationit would absorb newly arrived money by decreasing its holdings of domestic bonds or the opposite if money were flowing out of the country.

But for a small open economy with perfect capital mobility and a flexible exchange rate, the domestic interest rate is predetermined by the horizontal BoP curve, and so by the LM equation given previously there is exactly one level of output that can make the money market be in equilibrium at that interest rate.