Monetary economics

1. VIJAYANAGARA SRI KRISHNA DEVARAYA UNIVERSITY
POST GRADUATE CENTRE NANDIHALLI
NAME :- RAMESHA GORAVARA
DEPARTMENT :- DEPARTMENT OF ECONOMICS
YEAR :- Ist YEAR
SUB :- MONETARY MACRO ECONOMICS
TOPIC :- IS – LM MODELL IN OPEN ECONOMY
( MUNDELL – FLEMING MODEL )
MENTOR :- DR NAYAKARA HONNURUSWAMY
CO ORDINATER DEPARTMENT OF ECONOMICS
POST GRADUATE NANDIHALLI

2. Fixed Exchange Rate Perfect Capital Mobility and Fiscal Policy
 Economy as at Recession
 Expansionary Fiscal Policy
(GE , Tx , S )
IS Curve shifts rightward
AD and Income Ri ( r1 > r )
Y or Output Capital Inflow ( More $ )
X < M ( Import ) Capital Account Surplus
Current Account Deficit BOP Surplus ( Balance of Payment )
Revaluation
 Supply of $ increase and Value of $ Decrease thus
 Value of ₹ increase and then money supply also increase.
 RBI sell ₹ to public and buy $ from public.
 LM shifts rightward

3. Fixed Exchange Rate Perfect Capital Mobility and Fiscal Policy Daigramm

4. Fixed Exchange Rate Perfect Capital Mobility and Monetary
Policy
 Economy as at Recession
 Expansionary Monetary Policy
( Money Supply )
LM Curve shifts rightward
AD and Income Ri ( r < r1 )
Y or Output Capital Plight or outflow
X < M ( Import ) Capital Account Deficit
Current Account Deficit BOP Deficit ( Balance of Payment )
Devaluation
 Demand of $ increase and Value of $ increase thus
 Value of ₹ Decrease and then money supply also increase.
 RBI sell $ to public and buy ₹ from public.
 Then Money supply is decrease.
 LM Curve shifts backward.

5. Fixed Exchange Rate Perfect Capital Mobility and Monetary Policy Daigramm

6. Flexible Exchange Rate Perfect Capital Mobility and Fiscal Policy
 Economy as at Recession
 Expansionary Fiscal Policy
(GE , Tx , S )
IS Curve shifts rightward
AD and Income Ri ( r1 > r )
Y or Output Capital Inflow ( $ inflow )
X < M ( Import ) Capital Account Surplus
Current Account Deficit BOP Surplus ( Balance of Payment )
Appreciation
 Supply of $ increase and Value of $ Decrease thus
 Demand of ₹ increase and Value of ₹ increase.
 RBI sell ₹ to public and buy $ from public.
 IS curve shift backward.

7. Flexible Exchange Rate Perfect Capital Mobility and Fiscal Policy Daigrammm

8. Flexible Exchange Rate Perfect Capital Mobility and Monetary Policy
 Economy as at Recession
 Expansionary Monetary Policy
( Money Supply )
LM Curve shifts rightward
AD and Income Ri ( r1 < r )
Y or Output Capital Plight or outflow
X < M ( Import ) Capital Account Deficit
Current Account Deficit BOP Deficit ( Balance of Payment )
Depreciation
 Value of $ increase and Supply of $ Decrease thus
 Money Supply of ₹ increase and then Value of ₹ Decrease
 This situation Export is increase and Import is decrease
because of goods and services prices are decreases.
 IS Curve shifts rightward.

9. Flexible Exchange Rate Perfect Capital Mobility and Monetary Policy Daigram