Peter Cooper — Short & Simple 19 – Sectoral Balances in a Closed, Demand-Determined Economy

We have seen that the ‘income-expenditure model’ combines key macro identities (introduced in parts 7 and 15) with particular behavioral assumptions to provide a theory of income determination (considered in parts 16 and 18). The behavioral assumptions relate to causation. The causation envisaged in the income-expenditure model has implications for the sectoral balances, some of which are the focus of the present post....

heteconomist
Short & Simple 19 – Sectoral Balances in a Closed, Demand-Determined Economy
Peter Cooper

Peter Cooper — Short & Simple 18 – Income Determination in a Closed Economy

In this and upcoming parts of the series, we will look in a little more detail at the ‘income-expenditure model’. The foundations of the model have been introduced in the previous two parts (here and here)….

heteconomist
Short & Simple 18 – Income Determination in a Closed Economy
Peter Cooper

Ari Andricopoulos — On Currency Devaluation (Deliberate and Otherwise)

It is an unstated central bank policy in many parts of the world to reduce the value of their currency to below its fair value. The reason for doing so is 'competitiveness'. A weaker currency means lower global prices for your goods and hence increases your exports, while at the same time reducing imports. Since a fundamental equation of economics says that GDP = C+I+G+X, or consumption plus investment plus government expenditure plus net exports; it would appear self evident that an increase in net exports would increase GDP.

This is, unfortunately, completely wrong. There are two ways that it is wrong, both pretty fundamental….

Notes on the Next Bust

On Currency Devaluation (Deliberate and Otherwise)

Ari Andricopoulos, principal at Dacharan Advisory AG, PhD. in Financial Mathematics