Polak model

Overview

The Polak model is a monetary approach to the balance of payment published by J. J. Polak in 1957. It seeks to model a small, open economy operating under fixed nominal exchange rate. Polak suggest explicit links between the monetary and external sectors. Polak results continue to form the theoretical bases on which the IMF Financial Programming are carried out. The Polak Model is based on the following four equations:

M

d

v = Y

{\displaystyle M_{d}v=Y}

Z = m Y

{\displaystyle Z=mY}

Δ

M

s

= Δ R + Δ D C

{\displaystyle \Delta M_{s}=\Delta R+\Delta DC}

Δ R = X − Z + Δ F

{\displaystyle \Delta R=X-Z+\Delta F}

Where

M

d

{\displaystyle M_{d}}

is the demand for money,

v

See also

Mundell–Fleming model Marshall–Lerner condition

Further reading

Polak, J. J., (1957), Monetary Analysis of Income Formation and Payments Problems, IMF Staff Papers, 6, issue 1, p. 1-50. Mohsin S. Khan and Peter J. Montiel, A Marriage between Fund and Bank Models? Reply to Polak,IMF Staff Papers, Vol. 37, No. 1 (Mar., 1990), pp. 187–191