Class Notes (838,403)
Canada (510,881)
Economics (1,617)
ECON 1BB3 (535)
Lecture

Open Economy

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Department
Economics
Course
ECON 1BB3
Professor
Bridget O' Shaughnessy
Semester
Fall

Description
Open economy: allows goods, services and capital to flow through borders freely Small open economy (SOE): not large enough to affect world interest rates or world prices Perfect capital mobility: full access to world financial markets ex Canada Interest rate parity : in theory the real interest rate (in Canada) should equal real interest in world financial markets R=R^w real interest rate must equal world real interest rate 2 markets: market for loanable funds and the ma
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