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"A Model of the Balance of
Payments," Journal of International
Economics, February 1979, 25-46.
pdf file (1,113KB).
A model of the balance of payments is presented in this paper in which
stock and flow effects are completely integrated. The model accounts for
all flows of funds in the system and allows for the endogenous
determination of the exchange rate. The model is first outlined in general
terms and then a particular `quasi-empirical' version of it is analyzed by
means of simulation techniques. The results of analyzing this version show
the likely importance of accounting for capital flows and price linkages
amoung countries in the construction of multicountry econometric models.
The theory that has guided the specification of my multicountry
econometric model is presented in this paper.
A discussion and extension of this work is in Section 2.2
in Testing Macroeconometric
An earlier discussion of this work is in Chapter 3, Section 3.2,
and the notes on page 462 in 1984#2