Online Appendix–Get the Lowdown: Building a Structural Open-Economy Model of the U.S. Natural Rate of Interest

I embed a competitive search model of the labor market into a small open economy model with heterogeneous firms and workers. Search frictions generate equilibrium unemployment and income inequality between identical workers, in addition to income differences between skill groups. A quantitative evaluation of the U.S. trade experience suggests that the effect of the increase in goods trade since 1980 may have contributed to the increase in the college premium, but not to the increase in residual inequality.

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A NOTE ON THE VOLATILITY OF THE TRADEABLE AND NONTRADEABLE SECTORS

Macroeconomic Dynamics ◽

10.1017/s1365100511000782 ◽

2012 ◽

Vol 17 (5) ◽

pp. 1158-1168 ◽

Cited By ~ 4

Author(s):

Laura Povoledo

Keyword(s):

Open Economy ◽

Monetary Shocks ◽

Economy Model ◽

Standard Deviations ◽

The U.S

This note evaluates whether a New Open Economy model can reproduce qualitatively the observed fluctuations of the tradeable and nontradeable sectors of the U.S. economy. The answer is positive: both in the model and in the data, the standard deviations of tradeable inflation, output, and employment are significantly higher than the standard deviations of the corresponding nontradeable sector variables. The key role in generating this result is played by the greater responsiveness of tradeable sector variables to monetary shocks.

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Estimating Natural Rate of Interest and Equilibrium Exchange Rate: A Case of the Czech Republic

Review of Economic Perspectives ◽

10.2478/revecp-2019-0013 ◽

2019 ◽

Vol 19 (4) ◽

pp. 231-248

Author(s):

Zdeněk Pikhart ◽

Pavla Froňková

Keyword(s):

Exchange Rate ◽

Interest Rates ◽

Open Economy ◽

Inflation Targeting ◽

Condition Index ◽

Equilibrium Exchange Rate ◽

Natural Rate ◽

Equilibrium Exchange ◽

Natural Rate Of Interest ◽

Credit Cycle

Abstract Article deals with estimating real natural interest rate and exchange rate to construct monetary conditions index suitable for the Czech open economy. Despite unobservable characteristics of underlying interest rates and exchange rate, the importance of reference indicators for monetary policy is crucial. Proposed monetary condition index in gap form examines monetary impulse on economic and credit cycle in inflation targeting model.

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