Can new open economy macroeconomic models explain business cycle facts?
AbstractWe assess the ability of new open economy models to match OECD business cycle data. We adopt a canonical new open economy model with varying degrees of nominal inertia, monopolistic competition and distribution costs and assess the contribution of each facet of this model to help explain jointly the volatility and persistence of real exchange rates and the dynamics of the current account. Building on Chari, Kehoe and McGrattan (2002) and Schmitt-Grohe and Uribe (2003), we find that standard models do not capture these important relative price and quantity dynamics at the business cycle frequency. We explore the extent to which three extensions to the existing literature further our understanding: (i) overlapping generations, (ii) sunspots and (iii) financial frictions.
Download InfoIf 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.
Bibliographic InfoPaper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2004 with number 77.
Date of creation: 17 Sep 2004
Date of revision:
Contact details of provider:
Web page: http://www.essex.ac.uk/afm/mmf/index.html
Other versions of this item:
- Jagjit Chadha & Charles Nolan, 2004. "Can New Open Economy Macroeconomic Models Explain Business Cycle Facts?," Computing in Economics and Finance 2004 333, Society for Computational Economics.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.