Financial Markets and the Macroeconomy : A Keynesian Perspective,9780203880555

Financial Markets and the Macroeconomy : A Keynesian Perspective

by ; ; ;
ISBN13: 9780203880555
ISBN10: 0203880552
Pub. Date: 2009-05-28
Publisher(s): Taylor & Francis
List Price: $145.00

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Summary

The financial instability and its spillover to the real sector have become a great challenge to macro-economic theory. The book takes a Keynesian theoretical perspective, representing an attempt to revive what Keynes stressed in his General Theory, namely the role of the financial market in macroeconomic outcomes. Although this book is inspired and motivated by the Asian currency and financial crises in the years 1997-8 and the experiences of the currently evolving U.S. financial disruptions, it also focuses on reviving a modeling tradition that provides a theoretical framework that throws light on recent financial market episodes and disturbances and their macroeconomic effects. It brings to the forefront, as Keynes has suggested, the role of financial market stability for growth and macroeconomics. It criticizes theories that see economic disruptions and shocks rooted solely in the real side of the economy. It stresses the financial real interaction as the major source for macroeconomic instability and disruptions. This important new book from a group of Keynesian, but nonetheless technically oriented economists would be of most interest to specialists and graduate students in macroeconomics and financial economics, especially those with an interest in US and European financial markets, emerging market analysis, and dynamic economic modeling.

Table of Contents

Price Dynamics and the Macroeconomy
Introduction
Keynesian AD-AS Analysis
References (to be adjusted)
Stock Market and the Macroeconomy
Introduction
The Blanchard Model
Analysis of the Blanchard Model
The Jump Variable Technique
Conclusions
References
Appendix: Some Observations
Bond Market, Term Structure and the Macroeconomy
Introduction
The Modelm
Instability and the Jump Variable Technique
Alternatives to the Jump Variable Technique
Conclusions
References
Financial Markets in Open Economies
Introduction
Exchange Rate Dynamics in the IS-LM-PC-Model: Level-form Formulation
Exchange Rate Dynamics in the IS-LM-PC-Model: Loglinear Analysis
Rational Expectations in Open Economy IS-LM-PC Dynamics
References
Stock Market and Exchange Rates, II Stock Market Dynamics and the Macroeconomy: Some Extensions
Output and Stock Market Dynamics with State-dependent Financial Market Reactions
Introduction
The Model
Analysis of the Model
State-of-Market Dependent Reaction Speed - An Alternative to the JVT
Conclusions
References
Appendix: Relaxing Perfection
Real-FinancialMarket Interaction: Implications of Budget Equations and Capital Accumulation
Introduction
The Blanchard Model with Instrinsic Stock-Flow Dynamics
Intensive Form of the Model
Analysis
Jump-variable Coundums
References
Appendix: Adding the Dynamics of the Government Budget Contraint
A
Introduction
Model
Heterogeneous Expectations
Analysis of the Deterministic Skeleton
Analysis of the Nonlinear Stochastic Model
Conclusion
Appendix
A High-Dimensional Model of Real Financial Market Interaction: The Cascade of Stable Matrices Approach
Introduction
Formulation of the Model
The Model in Intensive Form
Subdynamics in the Real and Financial Sector
Local Stability Analysis of the Full 7D Dynamics
Conclusion
Stock Market, Interest Rate and Output: A Model and Estimation for US Time Series Data
Introduction
Stylized Facts and Macromodels
A Generalized Blanchard Model
The Dynamics of the Model
Discrete Time Form for Observable Variables
Empirical Results for US Time Series Data
Stochastic Simulations and Impulse Response Functions
Conclusions
Appendix 1Stability Analysis of the Blanchard Model
Appendix 2The Characteristic Equation of the Generalized Blanchard Model, III Exchange Rate, Dynamics Capital Flows and Currency Crises
Capital Account and Government Budget Dynamics in Perfect Open Economies
Introduction
The Basic One-Good Monetary Model of International Commodity Trade
The Monetary Adjustment Process
The Two-Commodity Extension
The Perfectly Open Economy: Basic and Advanced Fomulations
Twin Deficits and PPP / UIP Driven Price Dynamics
Active Fiscal and Monetary Policy in the Perfect Open Economy
Conclusions
Twin Deficits and Inflation in the Mundell-Fleming-Tobin Model
Introduction
Temporary Equilibrium
The Six Economic Regimes of the Model
Twin Deficits and Price Level Dynamics under Fixed and Floating Exchange Rates
Capital Account and Inflation with Interest and Exchange Rate Pegs
Overshooting Exchange Rate Dynamics
Conclusions
Financial Crisis, Currency Crisis and Large Output Loss
Introduction
Stylized Facts
The Basic Model
Budget Restrictions and National Accounting
Dynamics Under Flexible Exchange Rates
Currency Crisis in a Fixed Exchange Rate Regime
Conclusions
References
Emerging Market Economies, Currency Crisis and Price Level Adjustment
Introduction
The Basic Model
Local Stability Analysis
Currency Crises in a Pegged Exchange Rate System
Currency Crisis and Hedging
Adding Wage and Price Dynamics
Stability Analysis
The Dynamics of a Currency Crisis in the Extended Model
Conclusions and Outlook
Appendix 1Balance of Payments Adjustment Processes
Appendix 2Empirical Results
Outlook: International Capital Flows in the MFT Approach
Introduction
Integrating International Capital Flows into the MFT Approach
Real-Financial Disequilibrium Dynamics: Some Basic Results
Capital Flight, Global Players and the Emergence of Currency Crises
Conclusions and Outlook
Table of Contents provided by Publisher. All Rights Reserved.

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