Nominal rigidity and monetary uncertainty in a small open economy
AbstractA dynamic stochastic model of a small open monetary economy with infinitely-lived optimizing households is constructed. There are temporary nominal rigidities in the labour market, while in goods and asset markets prices are flexible. Optimizing behaviour in the foreign country is also modelled. The home country is small relative to the foreign country, so the latter is effectively a closed economy. We show that whereas in the closed economy an anticipated increase in monetary variability has no effect on current macroeconomic variables, in the small open economy it weakens the current exchange rate and expands current output.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 22 (1998)
Issue (Month): 5 (May)
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Web page: http://www.elsevier.com/locate/jedc
Other versions of this item:
- Rankin, Neil, 1995. "Nominal Rigidity and Monetary Uncertainty in a Small Open Economy," CEPR Discussion Papers 1231, C.E.P.R. Discussion Papers.
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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