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Country portfolios in open economy macro models

Author

Listed:
  • Michael B. Devereux
  • Alan Sutherland
Abstract
This paper develops a simple approximation method for computing equilibrium portfolios in dynamic general equilibrium open economy macro models. The method is widely applicable, simple to implement, and gives analytical solutions for equilibrium portfolio positions in any combination or types of asset. It can be used in models with any number of assets, whether markets are complete or incomplete, and can be applied to stochastic dynamic general equilibrium models of any dimension, so long as the model is amenable to a solution using standard approximation methods. We first illustrate the approach using a simple two-asset endowment economy model, and then show how the results extend to the case of any number of assets and general economic structure.

Suggested Citation

  • Michael B. Devereux & Alan Sutherland, 2008. "Country portfolios in open economy macro models," Globalization Institute Working Papers 09, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddgw:09
    Note: Published as: Devereux, Michael B. and Alan Sutherland (2010), "Country Portfolios Dynamics," Journal of Economic Dynamics and Control 34 (7): 1325-1342.
    as

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    File URL: http://dallasfed.org/assets/documents/institute/wpapers/2008/0009.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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