Re: DSE 2012 paper discussion-Please join

Posted by kangkan on Jun 09, 2014; 1:12pm
URL: http://discussion-forum.276.s1.nabble.com/DSE-2012-paper-discussion-Please-join-tp7590218p7592027.html

@akshay..this is what i 've done for 59.

Since,the marshall lerner condition syas that trade balance shud decrease following real appreciation, dt/de<0

For the given question(58), dt/de =-(x2-m1Y/e^2)

For the interest parity part,

r=r*+(e'-e)/e

Subtituing in the LM equation, we get

l2e'/e=l1*yl2*r*-l2-M

=>l2 e'/e=l1*Y- some constant

This will be negatively sloped irrespective of the marhsall lerner condition derived above

I dont know if this is right :(