Emiliya Zasheva no. Wrong. Balance of payments comprises more than trade balance. Trade balance is part of the current account and is just exports minus imports. The balance of payments also includes the capital and financial account.
What i can't understand is the following. We know that the Balance of Payments always balances from the identity (i.e double entry bookeeping). How can we be out of the BP curve then? I'm still confused with that.,
This usually happens when the world er increases, with this there will be no balance and the domestic ir stays in its previous place. This now puts the domestic ir below world er, putting outflow on the state. Balance of payments is just the equilibrium wherein world and domestic ir are equal. But because of capital mobility, the actors involved can adjust accordingly if the balance of trades is unsastified.
In first results NX>0 due i decrease cause exchange rate to make $ to depreciate. When $ depreciates it makes local products cheaper hence increase exports. Nx = Exp-Imp which leads to conclude Nx>0. This outcome has no contradiction to graphs just wrote as remark.
I really don't agree with this video. Firstly, if you assume the traditional Mundell Fleming model is considering the short run of an economy, you really should have a vertical LM curve as exchange rate does not enter the LM equation. Secondly, there should not be interest rate on the Y-axis as we are considering a small open economy. There should be the real exchange rate on the x-axis. Overall, the effect of monetary policy on a small open economy using the Mundell Fleming model should be 0 because money supply can't be adjusted under fixed exchange rate unless you devalue or revalue the currency. Effects of an expansionary fiscal policy would be an increase in income (Y) as the IS would shift right, causing the exchage rate to rise > followed by an increase in LM as foreign currency would be sold to the central bank > increasing money supply > and shifting the LM right = increase in income (Y).
I'm actually just reading a book on this, John Goodman's Monetary Sovereignty, that's how I ended up here, and I quote "In their influential work of the 1960s, J. Marcus Fleming and Robert Mundell showed that the effectiveness of monetary policy in an open economy depends on the type of exchange rate regime and the degree of capital mobility. With perfect capital mobility, the Mundell-Fleming model provides powerful conclusions about the effects of the two exchange rate regimes. Under fixed exchange rates, monetary policy is ineffective, even in the short run. An expansionary monetary policy leads to lower interest rates, which give rise, in turn, to outflows of capital." So yeah, the video has some mistakes apparently. Hope this helps someone.
sit down a shut up the video is all correct because I'm an economics professor at oxford university who loves to bash maths books day and night relentlessly. So don't at me and say this shit fake coz it aint bitch
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Please don't share such information In M-F model, in Y-axis there should be EXCHANGE RATE instead of INTEREST RATE... if u can please delete this video....
I'm studying at university at the moment and this is completely correct. It is also consistent with the textbook we have been recommended. Also, exchange rates are determined by interest rates (amongst other things). IR increase leads to demand for local currency and that leads to appreciation. Ceteris paribus, I don't think it matters very much. Finally, type 'Mundell Fleming Model' into good images. All have interest rates.
Ram Krishna Tiwari Most common university-level textbooks, my knowledge is far enough enriched to discuss with someone who: a) Can't spell/type with proper form. and b) Orders someone else to delete a video off of their own youtube channel because they've got it wrong - even though they were (ironically enough) correct in the first place.
Ram Krishna Tiwari is right, this video describes the IS-LM model(closed economy). The Mundell-Fleming model is similar to the IS-LM model, but the difference is that the IS-LM model is based on a closed economy whereas the Mundell-Fleming model describes what happens in a small open economy. He doesn't need to delete the video per se, he can just drop the M-F part in his title and make an annotation about the error. edit: Forget what I said here and read on.
how did you do it can you share with me , thank you
Thank you very much for this video. It really helped me with my revision towards my test
Legend! Final exam tomorrow, you helped alot!
Lol how it go
At university of Wollongong Australia, got my final out today about an hour ago. We made it
@@fatguineapig9536 congrats
BP is balance of payments account also called the trade balance (TB)
Emiliya Zasheva no. Wrong. Balance of payments comprises more than trade balance. Trade balance is part of the current account and is just exports minus imports. The balance of payments also includes the capital and financial account.
@@Me-ji2pn CA+FA=BOP=0
Hey Emiliya Zasheva, there is vast diff between BOP and BOT../
What i can't understand is the following. We know that the Balance of Payments always balances from the identity (i.e double entry bookeeping). How can we be out of the BP curve then? I'm still confused with that.,
Did you work it out?
This usually happens when the world er increases, with this there will be no balance and the domestic ir stays in its previous place. This now puts the domestic ir below world er, putting outflow on the state.
Balance of payments is just the equilibrium wherein world and domestic ir are equal.
But because of capital mobility, the actors involved can adjust accordingly if the balance of trades is unsastified.
в государстве фиксированный или плавающий курс, нужно уточнять, от этого разное поведение в экономике будет, соответственно и в модели
「もっと多くの人が必要なので、このビデオをもっと
In first results NX>0 due i decrease cause exchange rate to make $ to depreciate. When $ depreciates it makes local products cheaper hence increase exports. Nx = Exp-Imp which leads to conclude Nx>0. This outcome has no contradiction to graphs just wrote as remark.
Yeah I was wondering that too! Lower interest rates weaken domestic currency, which causes exports to go higher aka NX>0
Great video! what is BP?. Regards from Perú.
balance of payments
I'm so confused right now!
I really don't agree with this video.
Firstly, if you assume the traditional Mundell Fleming model is considering the short run of an economy, you really should have a vertical LM curve as exchange rate does not enter the LM equation.
Secondly, there should not be interest rate on the Y-axis as we are considering a small open economy. There should be the real exchange rate on the x-axis.
Overall, the effect of monetary policy on a small open economy using the Mundell Fleming model should be 0 because money supply can't be adjusted under fixed exchange rate unless you devalue or revalue the currency.
Effects of an expansionary fiscal policy would be an increase in income (Y) as the IS would shift right, causing the exchage rate to rise > followed by an increase in LM as foreign currency would be sold to the central bank > increasing money supply > and shifting the LM right = increase in income (Y).
Hamza Afandi That's the Mankiw version. the original Mundell Fleming model replaces exchange rates and adds the BP horizontal line. Look it up.
Juan Madrigal so which method is correct?
In Macro nothing is really correct, just all theories.
I'm actually just reading a book on this, John Goodman's Monetary Sovereignty, that's how I ended up here, and I quote "In their influential work of the 1960s, J. Marcus Fleming and Robert Mundell showed that the effectiveness of monetary policy in an open economy depends on the type of exchange rate regime and the degree of capital mobility. With perfect capital mobility, the Mundell-Fleming model provides powerful conclusions about the effects of the two exchange rate regimes. Under fixed exchange rates, monetary policy is ineffective, even in the short run. An expansionary monetary policy leads to lower interest rates, which give rise, in turn, to outflows of capital." So yeah, the video has some mistakes apparently. Hope this helps someone.
sit down a shut up the video is all correct because I'm an economics professor at oxford university who loves to bash maths books day and night relentlessly. So don't at me and say this shit fake coz it aint bitch
Thanks a lot for the great information
why did u skip the letter C for an equilibrium label? A, B, D?
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the video image is too poor, you need to fix it more
Thank you very much. Great explanation.
great video, thank you!
Bless you man
Thanks for this info
A great help, thank you!
thanks a lot
great help
Govn buy bond?!!!!!
lolllllllll
#GIGATOWNPMN
are u sure???????????????????????????????/
dude just have energy and be passionate when you are explaining economic please please
Please don't share such information In M-F model, in Y-axis there should be EXCHANGE RATE instead of INTEREST RATE... if u can please delete this video....
I'm studying at university at the moment and this is completely correct. It is also consistent with the textbook we have been recommended.
Also, exchange rates are determined by interest rates (amongst other things). IR increase leads to demand for local currency and that leads to appreciation. Ceteris paribus, I don't think it matters very much.
Finally, type 'Mundell Fleming Model' into good images. All have interest rates.
No he is correct.
Who says m incorrect? first enrich your knowledge and come here to discuss..
Ram Krishna Tiwari Most common university-level textbooks, my knowledge is far enough enriched to discuss with someone who:
a) Can't spell/type with proper form.
and
b) Orders someone else to delete a video off of their own youtube channel because they've got it wrong - even though they were (ironically enough) correct in the first place.
Ram Krishna Tiwari is right, this video describes the IS-LM model(closed economy). The Mundell-Fleming model is similar to the IS-LM model, but the difference is that the IS-LM model is based on a closed economy whereas the Mundell-Fleming model describes what happens in a small open economy.
He doesn't need to delete the video per se, he can just drop the M-F part in his title and make an annotation about the error.
edit: Forget what I said here and read on.