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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### Modèle OG-DG — Wikipédia

In contrast, under fixed exchange rates e is exogenous and the balance of payments surplus is determined by the model. One of the assumptions of the Mundell—Fleming model is that domestic and foreign securities are perfect substitutes. Under both types of exchange rate regime, the nominal domestic money supply M is mundel, but for different reasons.

Higher disposable income or a lower real interest rate nominal interest rate minus expected mundelk leads to higher consumption spending.

This result is not compatible with what the Mundell-Fleming predicts. 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.

But in the Mundell—Fleming open economy model with perfect capital mobility, monetary policy becomes ineffective. Nevertheless, Dornbusch concludes that monetary policy is still effective even if it worsens a trade balance, because a monetary expansion pushes down interest rates and encourages spending.

A decrease in the money supply causes the exact opposite process. This principle is frequently called the ” impossible trinity ,” “unholy trinity,” “irreconcilable trinity,” “inconsistent trinity,” policy trilemma,” or the “Mundell—Fleming trilemma.

The decrease in the money supply resulting from the outflow, shifts the LM curve to the left until it intersect the IS and BoP curves at their intersection. Journal of International Economics. He adds that, in the short run, fiscal policy works because it raises interest rates and the velocity of money.

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

However, in reality, the world interest rate is different from the domestic rate. Under modls fixed exchange rate system, the central bank operates in the foreign exchange market to maintain a specific exchange rate.

If the central bank is maintaining an exchange rate that is consistent fpeming a balance of payments surplus, over time money will flow into the country and the money supply will rise and vice versa for a payments deficit. The denominator is positive, and the numerator is positive or negative.

## Modèle OG-DG

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. Views Read Edit View history. Higher domestic income GDP leads to more spending on imports and hence lower net exports; higher foreign income leads to higher spending by foreigners on the country’s exports and thus higher net exports.

If the global interest rate declines below the domestic rate, the opposite occurs. This keeps the domestic currency’s exchange rate at its targeted level.

This lfeming mean that domestic interest rates and GDP rise. After the subsequent equations are substituted into the first three equations above, one has a system of three equations in three unknowns, two of which are GDP and the domestic interest rate. 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.

The Mundell—Fleming model portrays the short-run relationship between an economy’s nominal exchange rate, interest rate, and output in contrast to the closed-economy IS-LM model, which focuses only mldle the relationship between the interest rate and output.

### Mundell–Fleming model – Wikipedia

In the closed economy model, if the central bank expands the money supply the LM curve shifts out, and as a result income goes up and the domestic interest rate goes down. 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.

Basic assumptions of the model are as follows: This page was last edited on 7 Novemberat But under perfect capital mobility, any such sterilization would be met by further offsetting international flows. If there is pressure to devalue the domestic currency’s exchange rate because lfeming 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 flming.

## Mundell–Fleming model

The Mundell—Fleming model under a fixed exchange rate regime also has completely different implications from those of the closed economy IS-LM model. Under perfect capital mobility, the new BoP curve will be horizontal at the new world interest rate, so the equilibrium domestic interest rate will equal the flemiing interest rate. The IS curve is downward sloped and the LM curve is upward sloped, as in the closed economy IS-LM analysis; the BoP curve is upward sloped unless there is perfect mpdle mobility, in which case it is horizontal at the level of the world interest rate.