Advanced Search
MyIDEAS: Login to save this article or follow this journal

Technology shocks under varying degrees of financial openness

Contents:

Author Info

  • Cakici, S. Meral

Abstract

The objective of this paper is to analyze the implications of varying degrees of financial openness for the impact of technology shocks on a real, small open economy with financial and informational frictions. Aggregate fluctuations and propagation mechanisms under increasing financial openness are investigated in a dynamic, stochastic, general equilibrium framework in the case of positive technology shocks. The imperfections in the economy in the form of informational asymmetries among the agents and uncertainty in the production process necessitate financial intermediation and collateralized borrowing in the economy. The reason to abstract from money in the setup of the framework is to be able to concentrate on the real implications of increasing financial openness for the effect of technology shocks, business cycle implications of which have long been discussed in the literature. It is shown that increasing financial openness amplifies the impact of positive, temporary technology shocks on output, investment, consumption, labor supply and net exports.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S1059056011000815
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 21 (2012)
Issue (Month): 1 ()
Pages: 232-245

as in new window
Handle: RePEc:eee:reveco:v:21:y:2012:i:1:p:232-245

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/620165

Related research

Keywords: Financial openness; Dynamic stochastic general equilibrium; Technology shocks; Propagation;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Frederic S. Mishkin, 2007. "Is Financial Globalization Beneficial?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 259-294, 03.
  2. Kose, M. Ayhan & Prasad, Eswar & Taylor, Ashley D., 2009. "Thresholds in the Process of International Financial Integration," IZA Discussion Papers 4133, Institute for the Study of Labor (IZA).
  3. C. Alper & S. Cakici, 2009. "Financial Liberalization, Fiscal Prudence and Growth: Panel Evidence from 1980–2003," Open Economies Review, Springer, vol. 20(4), pages 509-524, September.
  4. Martin Feldstein & Jerry Green, 1979. "Why Do Companies Pay Dividends?," NBER Working Papers 0413, National Bureau of Economic Research, Inc.
  5. M. Ayhan Kose & Eswar Prasad & Kenneth S. Rogoff & Shang-Jin Wei, 2006. "Financial Globalization: A Reappraisal," NBER Working Papers 12484, National Bureau of Economic Research, Inc.
  6. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
  7. Özge Senay, . "The Effectiveness of Monetary and Fiscal Policy with Different Degrees of Goods and Financial Market Integration," Discussion Papers 98/14, Department of Economics, University of York.
  8. Jordi Gali, 1996. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations," NBER Working Papers 5721, National Bureau of Economic Research, Inc.
  9. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, vol. 81(4), pages 797-818, September.
  10. Jordi Galí, 2004. "On The Role of Technology Shocks as a Source of Business Cycles: Some New Evidence," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 372-380, 04/05.
  11. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers 9510, University of Western Ontario, Department of Economics.
  12. Simon G. Gilchrist & Ben Bernanke & Mark Gertler, 1994. "The financial accelerator and the flight to quality," Finance and Economics Discussion Series 94-18, Board of Governors of the Federal Reserve System (U.S.).
  13. Peter Blair Henry, 2006. "Capital account liberalization: theory, evidence, and speculation," Working Paper Series 2007-32, Federal Reserve Bank of San Francisco.
  14. Susanto Basu & John Fernald & Miles Kimball, 2004. "Are Technology Improvements Contractionary?," NBER Working Papers 10592, National Bureau of Economic Research, Inc.
  15. Claudia M. Buch & Jörg Döpke & Christian Pierdzioch, 2002. "Financial Openness and Business Cycle Volatility," Kiel Working Papers 1121, Kiel Institute for the World Economy.
  16. Sergio L. Schmukler & Graciela Laura Kaminsky, 2003. "Short-Run Pain, Long-Run Gain," IMF Working Papers 03/34, International Monetary Fund.
  17. Philip R. Lane and Gian Maria Milesi-Ferretti, 2008. "The Drivers of Financial Globalization," The Institute for International Integration Studies Discussion Paper Series iiisdp238, IIIS.
  18. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937, December.
  19. Timothy S. Fuerst, 1994. "Monetary and financial interaction in the business cycle," Proceedings, Federal Reserve Bank of Cleveland, pages 1321-1353.
  20. Haiping Zhang & Jurgen von Hagen, 2007. "A Welfare Analysis of Capital Account Liberalization," Working Papers 19-2007, Singapore Management University, School of Economics.
  21. Menzie D. Chinn & Hiro Ito, 2005. "What Matters for Financial Development? Capital Controls, Institutions, and Interactions," NBER Working Papers 11370, National Bureau of Economic Research, Inc.
  22. Ester Faia, 2010. "Financial Frictions And The Choice Of Exchange Rate Regimes," Economic Inquiry, Western Economic Association International, vol. 48(4), pages 965-982, October.
  23. Marianne Baxter, 1995. "International Trade and Business Cycles," NBER Working Papers 5025, National Bureau of Economic Research, Inc.
  24. Peter Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Discussion Papers 07-004, Stanford Institute for Economic Policy Research.
  25. S. Rao Aiyagari, 1994. "On the contribution of technology shocks to business cycles," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 22-34.
  26. Nobuhiro Kiyotaki & John Moore, 1995. "Credit Cycles," NBER Working Papers 5083, National Bureau of Economic Research, Inc.
  27. Timothy Cogley & James M. Nason, 1993. "Output dynamics in real business cycle models," Working Papers in Applied Economic Theory 93-10, Federal Reserve Bank of San Francisco.
  28. Robert G. King & Sergio T. Rebelo, 2000. "Resuscitating Real Business Cycles," NBER Working Papers 7534, National Bureau of Economic Research, Inc.
  29. Holmstrom, Bengt & Tirole, Jean, 1997. "Financial Intermediation, Loanable Funds, and the Real Sector," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 663-91, August.
  30. Mark L. Gertler, 1988. "Financial Structure and Aggregate Economic Activity: An Overview," NBER Working Papers 2559, National Bureau of Economic Research, Inc.
  31. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  32. Neumann, Rebecca M. & Penl, Ron & Tanku, Altin, 2009. "Volatility of capital flows and financial liberalization: Do specific flows respond differently?," International Review of Economics & Finance, Elsevier, vol. 18(3), pages 488-501, June.
  33. von Hagen, Jürgen & Zhang, Haiping, 2008. "Financial frictions, capital reallocation, and aggregate fluctuations," Journal of Economic Dynamics and Control, Elsevier, vol. 32(3), pages 978-999, March.
  34. Sutherland, Alan, 1996. " Financial Market Integration and Macroeconomic Volatility," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 521-39, December.
  35. Ali Dib, 2001. "An Estimated Canadian DSGE Model with Nominal and Real Rigidities," Working Papers 01-26, Bank of Canada.
  36. M. Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2006. "Financial Globalization," IMF Working Papers 06/189, International Monetary Fund.
  37. Jonas D. M. Fisher, 2006. "The Dynamic Effects of Neutral and Investment-Specific Technology Shocks," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 413-451, June.
  38. Baxter, Marianne, 1995. "International trade and business cycles," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 35, pages 1801-1864 Elsevier.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. S. Meral Cakici, 2011. "Default Risk Premium and Aggregate Fluctuations in a Small Open Economy," Koç University-TUSIAD Economic Research Forum Working Papers 1131, Koc University-TUSIAD Economic Research Forum.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:21:y:2012:i:1:p:232-245. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.