## Solving for Country Portfolios in Open Economy Macro Models

_IMF Working Papers, December 1, 2007_

## Source details

**Canonical URL:** [Solving for Country Portfolios in Open Economy Macro Models](https://www.imf.org/en/publications/wp/issues/2016/12/31/solving-for-country-portfolios-in-open-economy-macro-models-21126)

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## Bibliographic details
- Authors: Michael B. Devereux, Alan Sutherland
- Published: December 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451868470.001

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### Summary
- Presents a general approximation method for characterizing time-varying equilibrium portfolios in a two-country dynamic general equilibrium model.
- The approximation provides simple, easily interpretable closed form solutions for the dynamics of equilibrium portfolios.

### Method and key features
- The method can be easily adapted to most dynamic general equilibrium models.
- Applies to environments in which markets are complete or incomplete.
- Can be used for models of any dimension.
- Produces closed form solutions that approximate the dynamics of equilibrium portfolios.

### Findings and implications
- Time-varying equilibrium portfolios in a two-country dynamic general equilibrium framework can be characterized using the presented approximation method.
- The closed form nature of the approximation aids interpretability of portfolio dynamics across different model specifications and market completeness assumptions.

### Applicability and scope
- Model context: two-country dynamic general equilibrium model.
- Applicability: adaptable to most dynamic general equilibrium models; valid under complete and incomplete market environments; usable for models of any dimension.
- Outputs: simple, easily interpretable closed form solutions for equilibrium portfolio dynamics.

### Subjects and keywords
- Subject: Asset allocation, Bonds, General equilibrium models, Securities markets, Stocks
- Keywords: mover accent, WP

*IMF Working Papers — Solving for Country Portfolios in Open Economy Macro Models (Devereux and Sutherland, December 1, 2007).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/solving-for-country-portfolios-in-open-economy-macro-models-21126_