Volatility of the Tradeable and Non-Tradeable Sectors: Theory and evidence
AbstractThis paper investigates the business cycle fluctuations of the tradeable and nontradeable sectors of the US economy. Then, it evaluates whether a “New Open Economy” model having prices sticky in the producer’s currency can reproduce the observed fluctuations qualitatively. The answer is positive: the model-implied standard deviations are consistent with the pattern in the data. In particular, tradeable output is more volatile than nontradeable output. A key role in generating this result is played by the greater responsiveness of tradeable output to monetary shocks. Parameter estimates are obtained by Generalised Method of Moments.
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Bibliographic InfoPaper provided by Henley Business School, Reading University in its series Economic Analysis Research Group Working Papers with number earg-wp2007-10.
Length: 54 pages
Date of creation: 2007
Date of revision:
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More information through EDIRC
New Open Economy Macroeconomics; Tradeable and Nontradeable Sectors; Business Cycles;
Find related papers by JEL classification:
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-02-02 (All new papers)
- NEP-CBA-2008-02-02 (Central Banking)
- NEP-MAC-2008-02-02 (Macroeconomics)
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