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Mundell fleming model and Ireland

  • 01-05-2013 8:28pm
    #1
    ebayissues
    Registered Users Posts: 448 ✭✭


    Hi guys,

    Can the mundell fleming model be used concerning ireland/icelend/or any a small open economy regards what type of monetary policy they are using in a fixed/flexible exchange system.


    I have read the mundel fleming model but how can I link it to ireland. e.g if Ireland were to peg its currency to the sterling. it would need lots of foreign reserves to protect itself against economic shocks. How can I link this to the Flemming model ?

    Any suggestions appreciated


Comments

  • #2
    andrew
    Moderators, Science, Health & Environment Moderators, Society & Culture Moderators Posts: 3,372 Mod ✭✭✭✭andrew


    ebayissues wrote: »
    Hi guys,

    Can the mundell fleming model be used concerning ireland/icelend/or any a small open economy regards what type of monetary policy they are using in a fixed/flexible exchange system.


    I have read the mundel fleming model but how can I link it to ireland. e.g if Ireland were to peg its currency to the sterling. it would need lots of foreign reserves to protect itself against economic shocks. How can I link this to the Flemming model ?

    Any suggestions appreciated


    Are you asking whether the Mundell-Fleming model can be used to analyse exchange rate/currency crisis'?


  • #3
    ebayissues
    Registered Users Posts: 448 ✭✭ebayissues


    andrew wrote: »
    Are you asking whether the Mundell-Fleming model can be used to analyse exchange rate/currency crisis'?

    Yes/no, its more of using it to back up analysis of why Small open economies should choose floating or fixed exchange rates.


  • #4
    andrew
    Moderators, Science, Health & Environment Moderators, Society & Culture Moderators Posts: 3,372 Mod ✭✭✭✭andrew


    ebayissues wrote: »
    Yes/no, its more of using it to back up analysis of why Small open economies should choose floating or fixed exchange rates.

    As far as I remember, the mundell-fleming model is just used to analyse/demonstrate the trilemma, and what policy constraints exist under each exchange rate regime. So it can't really be used to say what a small open economy 'should' do, since it doesn't make a distinction itself between small and large economies.


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