Money and Wealth in an Open Economy Income–Expenditure Model1
CARLOS A. RODRIGUEZ
The purpose of this chapter is to analyse some of the dynamic implications of the endogeneity of the money supply implicit in a trading world with fixed exchange rates.2 The world we choose to represent is a Keynesian one where prices are constant and outputs are responsive to changes in aggregate demands. Models where prices are fully flexible and outputs are constant or growing at an exogenous rate can be found in Prais (1961), Mundell (1968), and Johnson (1972). Despite the wide difference in assumptions, both types of models bear the common characteristic that the balance of payments is one of the channels through which countries can adjust their actual to ...
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