scholarly journals Forecasting macroeconomic variables in a small open economy: a comparison between small- and large-scale models

2010 ◽  
Vol 29 (1-2) ◽  
pp. 168-185 ◽  
Author(s):  
Rangan Gupta ◽  
Alain Kabundi
Keyword(s):  
Open Economy ◽  
Large Scale ◽  
Small Open Economy ◽  
Macroeconomic Variables ◽  
Scale Models

scholarly journals Interest Rates Targeting of Monetary Policy: An Open Economy SVAR Study of Malaysia

2014 ◽  
Vol 16 (1) ◽  
pp. 1 ◽  
Author(s):  
Zulkefly Abdul Karim ◽  
Bakri Abdul Karim
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Open Economy ◽  
Small Open Economy ◽  
Structural Var ◽  
Macroeconomic Fluctuations ◽  
Stabilization Policy ◽  
Macroeconomic Variables ◽  
Implementation Of Monetary Policy ◽  
Foreign Shocks

This paper examines the implementation of monetary policy during the interest rates targeting in a small-open economy (i.e. Malaysia) by using an open-economy structural VAR (SVAR) study. It tests the effect of foreign shocks upon domestic macroeconomic fluctuations and monetary policy, and examines how effective monetary policy is in influencing macroeconomic variables. The results show that during interest rates targeting, monetary policy plays a significant role in affecting macroeconomics variables. This finding suggests that monetary policy has an important role as a stabilization policy in a small-open economy.     

scholarly journals A DSGE Model of Slovakia with Frictional Labor Market and Monetary Regime Switch

2017 ◽  
Vol 17 (3) ◽  
pp. 287-313
Author(s):  
Adam Pápai
Keyword(s):  
Labor Market ◽  
Open Economy ◽  
Slovak Republic ◽  
Structural Characteristics ◽  
Structural Parameters ◽  
Small Open Economy ◽  
Parameter Estimates ◽  
Macroeconomic Variables ◽  
Monetary Regime ◽  
Dynamic Stochastic

Abstract The aim of this paper is to examine the dynamical and structural characteristics of Slovakia using a dynamic stochastic general equilibrium model augmented with search and matching mechanisms and other forms of frictions. I implement a switching mechanism to account for the monetary regime change in Slovakia in 2009. My focus lies in the investigation of labor market rigidities that affect the macroeconomic variables. I also examine the long term impact of the recession in 2009 on the Slovak economy. My findings are as follows. Firstly, based on parameter estimates, I identify significant labor market frictions present in the Slovak Republic. Secondly, my results capturing the historical evolution of key macroeconomic variables support the view that the recession in the examined small open economy was mainly caused by shocks originating in the foreign sector. Thirdly, the monetary authority can influence the labor market variables through its transmission channels relatively effectively; and lastly, I discovered that the recession decreased the Slovak economy’s flexibility. While the results of estimations on two sub-samples are quite similar for most of the structural parameters, an increase in price and wage stickiness is observable.

scholarly journals Productivity Growth and Capital Flows: The Dynamics of Reforms

2017 ◽  
Vol 9 (3) ◽  
pp. 147-185 ◽  
Author(s):  
Francisco J. Buera ◽  
Yongseok Shin
Keyword(s):  
Financial Markets ◽  
Open Economy ◽  
Capital Flows ◽  
Large Scale ◽  
Small Open Economy ◽  
Economic Resources ◽  
Joint Dynamics ◽  
Capital Outflows ◽  
Investment Rates ◽  
Saving Rates

Why doesn't capital flow into fast-growing countries? Using a model with heterogeneous producers and underdeveloped domestic financial markets, we explain the joint dynamics of total factor productivity (TFP) and capital flows. When a large-scale economic reform removes preexisting idiosyncratic distortions in a small open economy, its TFP rises, driven by efficient reallocation of economic resources. At the same time, because of the domestic financial frictions, saving rates surge but investment rates respond only with a lag, resulting in capital outflows. The dynamics of TFP, capital flows, and idiosyncratic distortions in the model are consistent with what is observed during growth acceleration episodes, which often follow large-scale economic reforms. (JEL E21, E22, F21, F32, O16, O47)

Economic development and complexity: the role of recombinant capital

2019 ◽  
Author(s):  
Anthony M Endres ◽  
David A Harper
Keyword(s):  
Economic Development ◽  
Structural Change ◽  
Open Economy ◽  
Large Scale ◽  
Manufacturing Industry ◽  
Market Failure ◽  
Small Open Economy ◽  
Capital Formation ◽  
Function Concept ◽  
Government Failure

AbstractThe neoclassical aggregate production-function concept of capital is unsuitable for the study of economic development. We provide a more realistic account of capital formation in which development is understood as a disruptive, disequilibrium process of creating (not merely allocating or accumulating) capital and in which capital is conceived as a ‘recombinant’ process. We draw upon the seminal ideas of Schumpeter, Lachmann and Hirschman to formulate the notion of recombinant capital. Capital is a complex, emergent constellation of resource connections rather than a neoclassical ‘stock’. We conceptualise recombinant capital formation as a process of transforming connections in production structures. Capital structures are the unintended outcome of polycentric interactions among private entrepreneurs and government actors (managers of state-owned enterprises and political entrepreneurs). Recombinant capital formation and capital structures emerge endogenously from the creation and destruction of complex connections. The standard distinction between ‘market failure’ and ‘government failure’ is critically deficient in analysing the structural economic dynamics engendered by recombinant capital. The fertility of our conceptual framework is illustrated by a study of major structural change in a small open economy. This structural change arose from the interpolation of a new, large-scale manufacturing industry in a capital structure previously dominated by primary industries.

The long-run stability of a small, open economy under crawling peg regime

2002 ◽  
Vol 52 (1) ◽  
pp. 57-78
Author(s):  
S. Çiftçioğlu
Keyword(s):  
Exchange Rate ◽  
Open Economy ◽  
Risk Premium ◽  
Small Open Economy ◽  
Exchange Rate Policy ◽  
Price Stability ◽  
Output Stability ◽  
Long Run ◽  
The Exchange Rate ◽  
The Impact

The paper analyses the long-run (steady-state) output and price stability of a small, open economy which adopts a “crawling-peg” type of exchange-rate regime in the presence of various kinds of random shocks. Analytical and simulation results suggest that with the exception of money demand shocks, an exchange rate policy which involves a relatively higher rate of indexation of the exchange rate to price level is likely to lead to the worsening of price stability for all types of shocks. On the other hand, the impact of adopting such a policy on output stability depends on the type of the shock; for policy shocks to the exchange rate and shocks to output demand, output stability is worsened whereas for the shocks to risk premium of domestic assets, supply price of domestic output and the wage rate, better output stability is achieved in the long run.

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