文档介绍：Intermediate Macroeconomics
Lecture 13
1
The Open Economy
Why do countries trade with each other?
“No nation was ever ruined by trade.”
--- Benjamin Franklin
More varieties; higher quality; cheaper price
2
The Open Economy
Imports and exports as a % of GDP (2002)
3
The Open Economy
The international flows of capital & goods
Savings and investment in a small open economy
Exchange rates
Large open economy
4
International Flows of K & Goods
National Identity
5
International Flows of K & Goods
The capital & current account
6
International Flows of K & Goods
(I-S): capital account
NX: current account
(S-I): net foreign investment (NFI)
7
International Flows of K & Goods
Net Foreign Investment (NFI)
what we lend to foreigners – what we borrow from foreigners (net capital outflows)
net capital outflows=NFI = NX= trade balance
NFI = -capital account
S>I, net lender
S<I, net borrower
8
International Flows of K & Goods
Capital and current account balance
NX > 0 current account (trade) surplus
NFI = (S-I) > 0 (lender)
Capital account deficit
9
Small Open Economy
Closed economy:
Output must equal consumption
Savings must equal investment.
Open economy:
Access to world financial markets
Interest rates do not need to clear the domestic financial market
10