Essays On Small Open Economy New Keynesian Dsge Models
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Essays On Small Open Economy New Keynesian Dsge Models
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Author : Phuong Nguyen Van
language : en
Publisher:
Release Date : 2020
Essays On Small Open Economy New Keynesian Dsge Models written by Phuong Nguyen Van and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
A Small Open Economy New Keynesian Dsge Model For A Foreign Exchange Constrained Economy
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Author : Sisay Regassa Senbeta
language : en
Publisher:
Release Date : 2011
A Small Open Economy New Keynesian Dsge Model For A Foreign Exchange Constrained Economy written by Sisay Regassa Senbeta and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
Essays In Monetary Policy And Learning
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Author : Gabriela Best
language : en
Publisher:
Release Date : 2010
Essays In Monetary Policy And Learning written by Gabriela Best and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
My dissertation is composed by three chapters that study monetary policy, international economics, and adaptive learning. The first and third chapters estimate New Keynesian DSGE models in order to examine the fear of floating phenomenon pervasive in emerging markets and the causes of the Great Inflation in the U.S. The first chapter estimates a small open economy model for the period after the 1994 crisis in Mexico. I find that the estimation of a Taylor rule for setting nominal interest rates favors a consistent response to the short-run nominal exchange rate post 1994. These results provide evidence that Mexico suffers from fear of floating. The second and the third chapters of my dissertation contribute to the studies of the implications of adaptive learning in monetary policy. The second chapter evaluates the desirability of policy rules that respond to wage inflation in a model with staggered price and wage setting in the context of determinacy and stability under adaptive learning. I find that, when the central bank responds to wage and price inflation and to the output gap a Taylor principle for wage and price inflation arises, but it is not necessarily related to stability under learning dynamics The third chapter proposed two potential channels through which monetary policy played a role in the Great Inflation. One approach holds that monetary policymakers during the 1970s preferred stabilizing output while post 1979 they preferred inflation stabilization. An alternative explanation contends that the Federal Reserve held misperceptions about the structure of the economy. The Great Inflation analysis incorporates policymakers that are learning adaptively and in that fashion, they form erroneous beliefs about the structure of the economy. The empirical results conclude that both channels are necessary to illustrate the role played by monetary policy in propagating and ending the Great Inflation. My dissertation results support Sargent's (1999) view that adaptive learning is a relevant mechanism affecting inflation policy.
An Estimated Dsge Model Of A Small Open Economy Within The Monetary Union
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Author : Massimiliano Marcellino
language : en
Publisher:
Release Date : 2012
An Estimated Dsge Model Of A Small Open Economy Within The Monetary Union written by Massimiliano Marcellino and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
In this paper we lay out a two-region DSGE model of an open economy within the European Monetary Union. The model, which is built in the New Keynesian tradition, contains real and nominal rigidities such as habit formation in consumption, price and wage stickiness as well as rich stochastic structure. The framework also incorporates the theory of unemployment as in Gali et al. (2011), small open economy aspects and a nominal interest rate that is set exogenously by the area-wide monetary authority. As an illustration, the model is estimated on Luxembourgish data. We evaluate the properties of the estimated model and assess its forecasting performance relative to reduced form models such as VARs. In addition, we study the empirical validity of the DSGE model restrictions by applying a DSGE-VAR approach. Finally, the estimated model is used to analyze the sources of macroeconomic fluctuations and examine the responses of the economy to structural shocks.
Essays On Small Open Economy Macroeconomics
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Author :
language : en
Publisher:
Release Date : 2014
Essays On Small Open Economy Macroeconomics written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
In Chapter 1, using panel structural VAR analysis with quarterly data from six emerging Latin American countries, we document that the effects of government spending shocks depend on the share of public debt denominated in foreign currency. We find that the ratio of public debt denominated in foreign currency is a critical determinant of the real exchange rate responses. Economies with larger exposure to the foreign currency denominated public debt (HFC) responds with a real exchange rate depreciation to an increase in government consumption expenditure, while economies with a lower ratio (LFC) respond with real exchange rate appreciation. Correspondingly, the debt-to-GDP ratio in the HFC group increases faster in response to government spending shocks. Moreover, a rise in government spending increases private consumption more significantly in the HFC group. We find that government spending shocks raise output and consumption regardless of the currency denomination of debt. Moreover, the fiscal multipliers in both two groups are above one. To offer a theoretical explanation of these observed patterns, in Chapter 2 we develop a simple small open economy version of New Keynesian Open Economy Model (NOEM) and compare two model specifications which differ in the assumption about the currency denomination of debt: a foreign-currency bond economy (FB) and a domestic-currency bond economy (DB). In the FB (DB) economy, all debt is issued in foreign (domestic) currency. Comparing these two extreme assumptions allows us to shed light on the role of currency denomination of debt in explaining the cross-country variations in the effects of government spending shocks. We show that our proposed model can replicate the empirical findings documented in Chapter 1. A novel feature of our model is that the country-specific risk premium is positively correlated with the expected exchange rate depreciation, and the correlation parameter depends on currency denomination of debt. We discuss how our modification of risk premium makes the real exchange determined by two competing forces and under what conditions a real depreciation can be generated. In Chapter 3, we propose a generalized model in which both types of debt coexist and the ratio of foreign currency debt endogenously determines the strength of exchange rate depreciation mechanism. The model is shown to replicate well the observed responses of macroeconomic variables to an increase in government spending.
Informality And Macroeconomic Fluctuations
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Author : Sisay Regassa Senbeta
language : en
Publisher:
Release Date : 2013
Informality And Macroeconomic Fluctuations written by Sisay Regassa Senbeta and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Essays On Macroeconomic Policies And Household Heterogeneity
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Author : Gergő Motyovszki
language : en
Publisher:
Release Date : 2021
Essays On Macroeconomic Policies And Household Heterogeneity written by Gergő Motyovszki and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with Macroeconomics categories.
This thesis is composed of three independent chapters, but all centered around the broader topic of how macroeconomic policies interact with various aspects of household heterogeneity. Monetary Policy and Inequality under Labor Market Frictions and Capital-Skill Complementarity We provide a new channel through which monetary policy has distributional consequences at business cycle frequencies. We show that an unexpected monetary easing increases labor income inequality between high and less-skilled workers. In particular, this effect is prominent in sectors intensive in less-skilled labor, that exhibit high degree of capital-skill complementarity (CSC) and are subject to matching inefficiencies. To rationalize these findings we build a New Keynesian DSGE model with asymmetric search and matching (SAM) frictions across the two types of workers and CSC in the production function. We show that CSC on its own introduces a dynamic demand amplification mechanism: the increase in high-skilled employment after a monetary expansion makes complementary capital more productive, encouraging a further rise in investment demand and creating a multiplier effect. SAM asymmetries magnify this channel. Monetary-Fiscal Interactions and Redistribution in Small Open Economies Ballooning public debts in the wake of the covid-19 pandemic can present monetary-fiscal policies with a dilemma if and when neutral real interest rates rise, which might arrive sooner in emerging markets: policymakers can stabilize debts either by relying on fiscal adjustments (AM-PF) or by tolerating higher inflation (PM-AF). The choice between these policy mixes affects the efficacy of the fiscal expansion already today and can interact with the distributive properties of the stimulus across heterogeneous households. To study this, I build a two agent New Keynesian (TANK) small open economy model with monetary-fiscal interactions. Targeting fiscal transfers more towards high-MPC agents increases the output multiplier of a fiscal stimulus, while raising the degree of deficitfinancing for these transfers also helps. However, precise targeting is much more important under the AM-PF regime than the question of financing, while the opposite is the case with a PM-AF policy mix: then deficit-spending is crucial for the size of the multiplier, and targeting matters less. Under the PM-AF regime fiscal stimulus entails a real exchange rate depreciation which might offset "import leakage" by stimulating net exports, if the share of hand-to-mouth households is low and trade is price elastic enough. Therefore, a PM-AF policy mix might break the Mundell-Fleming prediction that open economies have smaller fiscal multipliers relative to closed economies. Weak Wage Recovery and Precautionary Motives after a Credit Crunch During the economic recovery following the financial crisis many advanced economies saw subdued wage dynamics, in spite of falling unemployment and an increasingly tight labour market. We propose a mechanism which can account for this puzzle and work against usual aggregate demand channels. In a heterogeneous agent model with incomplete markets we endogenize uninsurable idiosyncratic risk through search-and-matching (SAM) frictions in the labour market. In this setting, apart from the usual precautionary saving behaviour, households can self-insure also by settling for lower wages in order to secure a job and thereby avoid becoming borrowing constrained. This channel is especially pronounced for asset-poor agents, already close to the constraint. We introduce a credit crunch into this framework modelled as a gradual tightening of the borrowing constraint (and utilizing a continuous time approach, known as HACT). The perfect foresight transition dynamics feature falling wages despite a tightening labour market and expanding employment. As households suddenly find themselves closer to the borrowing constraint, the increased precautionary motive drives them to accept lower wages in the bargaining process, while firms respond to this by posting more vacancies, leading to a tighter labour market and falling unemployment. If the household deleveraging pressure is persistent enough after the credit crunch, it can explain the weak wage recovery in spite of already stronger aggregate demand.
Essays In International Monetary Economics
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Author : Olena Mykhaylova
language : en
Publisher:
Release Date : 2008
Essays In International Monetary Economics written by Olena Mykhaylova and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Monetary policy categories.
This dissertation focuses on the role of monetary policy in the rapidly changing global environment, characterized in particular by the adoption of the common currency by fifteen European countries and by rapid accumulation of foreign debt (or wealth) by many nations around the world. The first chapter calculates differences in welfare costs of nominal rigidities in the EMU countries. Using a two country DSGE model with optimizing agents, monopolistic wage and price setting and government debt dynamics, I find that these costs are virtually identical for all members of the EMU, and small countries are not at a disadvantage when it comes to the setting of the common monetary policy. This conclusion is primarily due to highly correlated technological processes in Europe, which cause national and Euro-wide inflations to move together. The second chapter studies the causes of the cyclical behavior of aggregate inflation and regional inflation differentials in the EMU. The answer has strong implications for monetary policy. In the United States, inflation rates move pro-cyclically, and across the Euro Area, inflation differentials are positively correlated with growth differentials. This suggests that demand shocks are the primary determinants of the cyclical behavior of aggregate inflation and regional inflation differentials. The conclusion is that demand shocks are either missing or inadequately modeled in the in typical New Keynesian model. In the last chapter, I study the impact of net foreign wealth on the optimal monetary policy of an open economy in a two-country DSGE model with incomplete markets, sticky prices and deviations from the Law of One Price. I find that by optimally manipulating monetary policy, central banks can affect the timing of interest receipts (or payments) and therefore increase the risk-sharing role of the internationally traded asset. In particular, debtor nations find it optimal to allow their currency to float relatively more freely than do creditor nations. We also find that for most specifications of the model, central banks should target a weighted average of CPI inflation and changes in the nominal exchange rate.
Dsge Models In Macroeconomics
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Author : Nathan Balke
language : en
Publisher: Emerald Group Publishing
Release Date : 2012-11-29
Dsge Models In Macroeconomics written by Nathan Balke and has been published by Emerald Group Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-11-29 with Business & Economics categories.
This volume of Advances in Econometrics contains articles that examine key topics in the modeling and estimation of dynamic stochastic general equilibrium (DSGE) models. Because DSGE models combine micro- and macroeconomic theory with formal econometric modeling and inference, over the past decade they have become an established framework for analy
A History Of Macroeconomics From Keynes To Lucas And Beyond
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Author : Michel De Vroey
language : en
Publisher: Cambridge University Press
Release Date : 2016-01-08
A History Of Macroeconomics From Keynes To Lucas And Beyond written by Michel De Vroey and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-01-08 with Business & Economics categories.
This book retraces the history of macroeconomics from Keynes's General Theory to the present. Central to it is the contrast between a Keynesian era and a Lucasian - or dynamic stochastic general equilibrium (DSGE) - era, each ruled by distinct methodological standards. In the Keynesian era, the book studies the following theories: Keynesian macroeconomics, monetarism, disequilibrium macro (Patinkin, Leijongufvud, and Clower) non-Walrasian equilibrium models, and first-generation new Keynesian models. Three stages are identified in the DSGE era: new classical macro (Lucas), RBC modelling, and second-generation new Keynesian modeling. The book also examines a few selected works aimed at presenting alternatives to Lucasian macro. While not eschewing analytical content, Michel De Vroey focuses on substantive assessments, and the models studied are presented in a pedagogical and vivid yet critical way.