Polak Model
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: formula_1 formula_2 formula_3 formula_4 Where formula_5 is the demand for money, formula_6 is the velocity of money (here considered constant), formula_7 is the output, formula_8 is the imports, formula_9  is the marginal propensity to import, formula_10 is the money supply, formula_11 is the amount of foreign reserves, formula_12 is the Domestic Credit, formula_13 is exports, and formula_14 are other net foreign currency flows. In the model the following variables are seen as exogenous: Real Output formula_15, Exports formula_16, other foreign currency inflows formula_17 formula_18. They have to be projected during the IMF Financial Programming exercise in order to set the desired levels for the target variables which are: Level of International Reserves formula_19 Inflation, of change in price for the domestic sector formula_20 and, Credit extended to the private  sector formula_21. The model also assumes that sooner or later the market will clear meaning that demand and supply of money will equal, or: formula_22