An Econometric Rational Expectations Macroeconomic Model for Developing Countries with Capital Controls

February 1, 1990

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An Econometric Rational Expectations Macroeconomic Model for Developing Countries with Capital Controls, (USA: International Monetary Fund, 1990) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

A small macroeconomic model based on familiar theoretical considerations is developed and estimated using data from 31 developing countries. Efficient estimation techniques are used to control for country heterogeneity under the assumption of rational expectations. The estimates and the test statistics suggest that the model could serve well as a framework for developing-country macroeconomic analysis. An interesting feature of the specification of the model is that it allows the hypothesis of capital mobility to be explicitly tested. The empirical analysis suggests that on average developing countries tend to exhibit a high degree of capital mobility.

Subject: Consumption, Demand for money, Disposable income, Income, Real interest rates

Keywords: Least squares, Money demand, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1990/011
Stock No:

WPIEA0111990
ISBN:

9781451925869
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 37, No. 3, September 1990.

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