Imperfect Intersectoral Labor Mobility and Monetary Shocks in a Small Open Economy

2009 ◽  
Vol 22 (4) ◽  
pp. 613-633 ◽  
Author(s):  
Juan Antonio Garcia-Cebro ◽  
Ramon Varela-Santamaria
Keyword(s):  
Open Economy ◽  
Labor Mobility ◽  
Small Open Economy ◽  
Monetary Shocks ◽  
Intersectoral Labor Mobility

scholarly journals Adjustment Costs and Nominal Rigidities in a Small Open Economy / Anpassungskosten und nominelle Rigiditäten in einer kleinen offenen Volkswirtschaft

2002 ◽  
Vol 222 (4) ◽  
Author(s):  
Alfred Maußner
Keyword(s):  
Time Series ◽  
Utility Function ◽  
Open Economy ◽  
Small Open Economy ◽  
Adjustment Costs ◽  
Monetary Shocks ◽  
Firm Level ◽  
Current Period ◽  
The Business Cycle ◽  
Simulated Time

SummaryWhat does account for the persistence of monetary shocks in dynamic general equilibrium models of the business cycle? A number of papers have dealt with that question and point at labor market frictions besides those introduced by overlapping wage contracts.In this paper I investigate an obvious source of persistence, namely small adjustment costs of labor at the firm level. These introduce indeed hump shaped impulse responses of hours worked in simulated time series. Compared with a benchmark model without nominal and real frictions my model outperforms the former in most respects.However, its account of the time series properties of monetary variables is not satisfactory. This holds true for closely related models that change the current period utility function, that introduce money into the utility function, or that posit a cash in advance constraint. I take this as suggestive to think about more sophisticated models of money demand.

scholarly journals One Money, Many Markets

2020 ◽  
Vol 20 (108) ◽  
Author(s):  
Giancarlo Corsetti ◽  
Joao Duarte ◽  
Samuel Mann
Keyword(s):  
Open Economy ◽  
Factor Model ◽  
Small Open Economy ◽  
Dynamic Factor ◽  
Monetary Shocks ◽  
Financial Variables ◽  
Consumer Prices ◽  
Frequency Identification ◽  
Cross Country ◽  
Adjustable Rate

We study the transmission of monetary shocks across euro-area countries using a dynamic factor model and high-frequency identification. We develop a methodology to assess the degree of heterogeneity, which we find to be low in financial variables and output, but significant in consumption, consumer prices, and variables related to local housing and labor markets. Building a small open economy model featuring a housing sector and calibrating it to Spain, we show that varying the share of adjustable-rate mortgages and loan-to-value ratios explains up to one-third of the cross-country heterogeneity in the responses of output and private consumption.

scholarly journals How Important Are Foreign Shocks in a Small Open Economy? The Case of Slovakia

2009 ◽  
Vol 9 (1) ◽  
pp. 1850155 ◽  
Author(s):  
Roman Horvath ◽  
Marek Rusnak
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Open Economy ◽  
Small Open Economy ◽  
Monetary Shocks ◽  
Positive Role ◽  
Interest Rate Policy ◽  
Monetary Policy Shock ◽  
Foreign Shocks

In this article, we provide evidence on the nature and the relative importance of domestic and foreign shocks – with a focus on monetary shocks – in the Slovak economy based on the block-restriction vector autoregression model during the years 1999–2007. We document a well-functioning monetary transmission mechanism in Slovakia. Subject to various sensitivity checks, we find that contractionary monetary policy shock has a temporary negative effect on the degree of economic activity and price level. We find that using output gap instead of GDP alleviates the price puzzle. In general, prices are driven mainly by foreign factors and the European Central Bank monetary policy shock on Slovak prices is more powerful than that of the National Bank of Slovakia. The Slovak Central Bank interest rate policy seems to follow the ECB's interest rates. On the other hand, spectacular Slovak economic growth is primarily driven by domestic factors suggesting the positive role of recently undertaken Slovak economic reforms.

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.

Sign in / Sign up

Export Citation Format

Share Document