A Small Open Economy New Keynesian DSGE Model for a Foreign Exchange Constrained Economy
Author: Sisay Regassa Senbeta
Publisher:
Published: 2011
Total Pages: 92
ISBN-13:
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Author: Sisay Regassa Senbeta
Publisher:
Published: 2011
Total Pages: 92
ISBN-13:
DOWNLOAD EBOOKAuthor: Marcos Antonio Coutinho da Silveira
Publisher:
Published: 2015
Total Pages:
ISBN-13:
DOWNLOAD EBOOKWe build a two-country version of the model in Gali & Monacelli (2005), which extends for a small open economy the new Keynesain DSGE model used as tool for monetary policy analysis in closed economies. A distinctive feature of the model is that the terms of trade enters directly into the new Keynesian Phillips curve as a new pushing-cost variable feeding the inflation. Furthermore, home bias in households' preferences allows for real exchange rate fluctuation, giving rise to alternative channels of monetary transmission. Unlike most part of the literature, the small domestic open economy is derived as a limit case of the two-coutry model, rather than assuming exogenous processes for the foreign variables. This procedure preserves the role played by foreign nominal frictions in the way as international monetary policy shocks are conveyed into the small domestic economy.
Author: Wendy Carlin
Publisher:
Published: 2010
Total Pages: 27
ISBN-13:
DOWNLOAD EBOOKAuthor: David Bowman
Publisher:
Published: 2003
Total Pages: 50
ISBN-13:
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Author: Sisay Regassa Senbeta
Publisher:
Published: 2013
Total Pages:
ISBN-13:
DOWNLOAD EBOOKAuthor: Roland Straub
Publisher: International Monetary Fund
Published: 2006-05
Total Pages: 36
ISBN-13:
DOWNLOAD EBOOKIn recent years, New Keynesian dynamic stochastic general equilibrium (NK DSGE) models have become increasingly popular in the academic literature and in policy analysis. However, the success of these models in reproducing the dynamic behavior of an economy following structural shocks is still disputed. This paper attempts to shed light on this issue. We use a VAR with sign restrictions that are robust to model and parameter uncertainty to estimate the effects of monetary policy, preference, government spending, investment, price markup, technology, and labor supply shocks on macroeconomic variables in the United States and the euro area. In contrast to the NK DSGE models, the empirical results indicate that technology shocks have a positive effect on hours worked, and investment and preference shocks have a positive impact on consumption and investment, respectively. While the former is in line with the predictions of Real Business Cycle models, the latter indicates the relevance of accelerator effects, as described by earlier Keynesian models. We also show that NK DSGE models might overemphasize the contribution of cost-push shocks to business cycle fluctuations while, at the same time, underestimating the importance of other shocks such as changes to technology and investment adjustment costs.
Author: Phuong Nguyen Van
Publisher:
Published: 2020
Total Pages:
ISBN-13:
DOWNLOAD EBOOKAuthor: Robert William Dimand
Publisher: Taylor & Francis US
Published: 2004
Total Pages: 532
ISBN-13: 9780415315647
DOWNLOAD EBOOKA collection of materials reprinted from various sources.
Author: Paolo Giordani
Publisher:
Published: 2004
Total Pages: 0
ISBN-13:
DOWNLOAD EBOOKWe suggest a strategy to evaluate members of a class of New-Keynesian models of a small open economy. As an example, we estimate a modified version of the model in Svensson [Journal of International Economics (2000) Vol. 50, pp. 155-183] and compare its impulse response and variance decomposition functions with those a structural vector autoregression (VAR) model. The focus is on responses to foreign rather than to domestic shocks, which facilitates identification. Some results are that US shocks account for large shares of the variance of Canadian variables, that little of this influence is due to real exchange rate movements, and that Canadian monetary policy is not adequately described by a Taylor rule.
Author: Assaf Razin
Publisher:
Published: 2001
Total Pages: 28
ISBN-13:
DOWNLOAD EBOOKThe paper extends Woodford's (2000) analysis of the closed economy Phillips curve to an open economy with both commodity trade and capital mobility. We show that consumption smoothing, which comes with the opening of the capital market, raises the degree of strategic complementarity among monopolistically competitive suppliers, thus rendering prices more sticky and magnifying output responses to nominal GDP shocks.