The specialisation of an economic model, created for open economies by Dornbusch in 1976, implies that a sudden expansion of the money supply makes the time path exponentially approach the higher steady-state level. This model was modified several times, but all modifications imply the typically exponential approach that does not fit empiric data. So we study models containing a time delay of the rate of inflation and get results which are more realistic.
Keywords
- Interest Rate
- Money Supply
- Time Path
- Convergent Series
- Closed Economy
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.