I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.
Please refresh your memory of last week’s blog – Sectoral balances – Part 1 – as this section of Chapter 6 builds directly on it.
"You can see that they satisfy Equation (6.5) – (G – T) = (S – I) – (X – M):
ReplyDelete(G – T) = (S – I) – (X – M)
8.6 = 5.9 – (-2.6)"
Nevermind the rounding off discrepancy but I have bugged him 2-3 times on this: He still confuses trade balance with current account balance.
I have wondered about that. Why is the identity always written as Y = C + I + G + (X-M) with (X-M) apparently presumed the same as the current account?
ReplyDeleteThe confusion arises due to confusing GDP and GNP.
ReplyDeleteSo rewrite by using GNP instead of GDP and one has CAB on the right hand side and then get the sectoral balances.