ECON0016 Macroeconomics Term 2 Summary UCL 21/22

AD-BT-ERU Model
Medium runmodelof Te targetingCB

bothflex fixedexc rate
models
MRITL q



t gn AD r r
dep r r

rarity

q MRE a constantTL
a constant
q
Find2 bygetting
new g Ye
ye y
AD




shiftsAD makesADsteeper

Ah d
aco
a
AG

a intsensitivityofAD
slopeof is

r a

r
g s 9
194
dep 9 AD r r
I
Rup
A
y

, BT

Pricesetting W N
Px It µ it µ E Pm p'e
unitcost

x M 6cal y't
home'sshareof
WÉTRADEy
m
Pff meal y Termsoftrade
g


Qdep competitiveness 9
TTworsens

whatdeterminesBT
a.m
dominate
y'T BTT
in LR

yt BTP Te whyAD
BT
QT volumeeffect Tx slopesup
my cond
Totworse

t gn AD r r
dep
BY
q x m
x am



ye y
whyis BTflatterthanAD

Ign
dep
AD r r't y'Tis ygivenBT o
I
BT since
1 alt e tamla santa
agg w at ing
Aye AyBT
Aye BTsurplus y y
3
I IBT y

,whatdeterminesq

SupplyshockthatshiftsERU

Pst Wsu




DemandshockthatshiftsAD
HA Art
At FYI

, a
PE AI AFI E AI

me
E


0
I
IMRE TE
based onworldto

totallyexogenous
nochoiceoverIMRE




Flex e r

IMRE Tt t

To EMRE

eg if IT 3 T 2

AE 1

ifhomeprices tfaster
thanworldprices
home'scompetitiveness t faster
thanworld'scompetitiveness

tobeatMRE e mustdepreciate
to haveAF 0