A Simple Model to Study Global Macroeconomic Interdependence

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Abstract

Insights into the international implications of China’s entry to the large economy club and the four-region strategic behaviour that results can be derived from applications of the elemental multi-region, macroeconomic simulation model introduced in this paper. It has a global general equilibrium structure that embodies bilateral linkages between represented regions via both trade and investment. Its behaviour is illustrated with an application to monetary policy following a period of deflationary expectations. Unilateral expansions are shown clearly to have negative real implications for the other large economies whose central banks are forced to respond in kind.
Original languageEnglish
PublisherUWA Business School
Publication statusPublished - 2013

Publication series

NameEconomics Discussion Papers
No.23
Volume13

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