This article describes a macroeconomic framework for analysing the interaction between output, domestic interest rate and exchange rate in the presence of the endogenous risk premium and balance sheet effect of exchange rate depreciation on investment demand. Output is demand determined. There are three assets: money, domestic bonds and foreign bonds. Domestic bonds and foreign bonds are not perfect substitutes due to the presence of risk premium. The endogenous risk premium depends on certain macroeconomic fundamentals, namely budget deficit and current account balance. Using this framework, we will examine implications of monetary policy, fiscal policy, tariff liberalization and global interest rate hike for exchange rate dynamics and output. The balance sheet effect and the risk premium together explain how an expansionary fiscal policy may generate recession, while tariff liberalization may produce favourable macroeconomic outcomes. Moreover, the model shows that an increase in world interest rate may have contractionary effect on the domestic output level due to the presence of the balance sheet effect of exchange rate depreciation. JEL Classification: E27, E63, F13, F32

中文翻译：

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汇率动态，内生风险溢价和资产负债表效应：有效的需求模型

本文介绍了一个宏观经济框架，用于分析在存在内生风险溢价和汇率贬值对投资需求的资产负债表效应的情况下产出，国内利率和汇率之间的相互作用。输出取决于需求。一共有三种资产：货币，国内债券和外国债券。由于存在风险溢价，国内债券和外国债券不是完美的替代品。内生风险溢价取决于某些宏观经济基本面，即预算赤字和经常账户余额。使用这个框架，我们将研究货币政策，财政政策，关税自由化和全球加息对汇率动态和产出的影响。资产负债表效应和风险溢价共同解释了扩张性财政政策如何导致衰退，而关税自由化可能产生有利的宏观经济成果。而且，该模型表明，由于汇率贬值的资产负债表效应的存在，世界利率的上升可能对国内生产水平产生收缩作用。JEL分类：E27，E63，F13，F32