Commodity markets and bond markets in a small, fixed-exchange-rate economy.

Commodity markets and bond markets in a small, fixed-exchange-rate economy. This paper opens up Metzler's macro-model for the small-country, fixed-exchange-rate case by explicitly disaggregating between traded and non-traded goods and between domestic bonds and foreign bonds. The distinction between stocks and flows carries over to that between the stock capital account (the level of reserves) and the flow capital and trade accounts (the balance of payments). Fiscal policy in non-traded goods causes an increase in reserves and has an ambiguous influence on the trade account. Monetary policy in domestic bonds worsens the trade account and has an ambiguous effect on the level of reserves. [ABSTRACT FROM AUTHOR]