Shock Persistence and Current Account Dynamics
One-sector inter-temporal models of the current account predict that a transitory shock to the terms of trade will lead to improvement in trade balance, while a persistent (or permanent) one could result in trade balance deterioration. This paper reexamines this issue in a two-sector small open economy model with non-traded goods and show that the result may not hold, depending on the exchange rate regime.
Volume (Year): 31 (2011)
Issue (Month): 3 ()
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- Michael B. Devereux & Philip R. Lane & Juanyi Xu, 2006.
"Exchange Rates and Monetary Policy in Emerging Market Economies,"
Royal Economic Society, vol. 116(511), pages 478-506, 04.
- Michael B. Devereux & Philip Lane, 2001. "Exchange Rates and Monetary Policy in Emerging Market Economies," CEG Working Papers 20017, Trinity College Dublin, Department of Economics.
- Philip R. Lane & Michael B. Devereux,Juanyi Xu, 2005. "Exchange Rates and Monetary Policy in Emerging Market Economies," The Institute for International Integration Studies Discussion Paper Series iiisdp036, IIIS.
- Michael B. Devereux & Philip R. Lane, 2000. "Exchange Rates and Monetary Policy in Emerging Market Economies," Working Papers 072000, Hong Kong Institute for Monetary Research.
- Michael B. Devereux & Philip Lane, 2001. "Exchange Rates and Monetary Policy in Emerging Market Economies," Trinity Economics Papers 200111, Trinity College Dublin, Department of Economics.
- Devereux, Michael B & Lane, Philip R., 2001. "Exchange Rates and Monetary Policy in Emerging Market Economies," CEPR Discussion Papers 2874, C.E.P.R. Discussion Papers.
- Kang Shi, 2011.
"Sectoral Labor Adjustment and Monetary Policy in a Small Open Economy,"
302011, Hong Kong Institute for Monetary Research.
- Shi, Kang, 2011. "Sectoral labor adjustment and monetary policy in a small open economy," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 634-643.
- Driskill, Robert, 2001. "Nontraded Goods and the Current Account," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 16-23, February.
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