Solving for Country Portfolios in Open Economy Macro Models; Michael B. Devereux and Alan Sutherland; IMF Working Paper 07/284; December 1, 2007
نویسندگان
چکیده
This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Open economy macroeconomics typically abstracts from portfolio structure. But financial globalization makes it important to understand the determinants and composition of gross country portfolios. This paper presents a simple approximation method for computing equilibrium financial portfolios in stochastic open economy macro models. The method is widely applicable, and delivers analytical solutions for optimal gross portfolio positions in any types of assets. It applies in models with any number of assets, whether markets are complete or incomplete, and can be applied to stochastic dynamic general equilibrium models of any dimension, so long as the model is solvable using standard approximation methods. JEL Classification Numbers: E52, E58, F41
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