IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/168.html

Wage Rigidity and Capital Mobility in an Optimizing Model of a Small Open Economy

Author

Listed:
  • van de Klundert, Theo C N J
  • van der Ploeg, Frederick

Abstract

This paper formulates an optimizing model of a small open economywith a representative (immortal) household, a firm and agovernment. The asset menu consists of domestic currency,non-traded bonds and traded bonds. There is a risk-premium ontraded bonds, which leads to deviations from perfect capitalmobility and UIP. Taxes are lump-sum, so that finance by bonds andby taxation are equivalent. The model allows for current-accountand wealth dynamics. There are six versions of the model dependingon whether one assumes purchasing power parity or imperfectsubstitution between home and foreign goods and on whether there islabour market equilibrium, nominal wage rigidity or real wagerigidity. For each of these variants, the steady-state effects of afiscal contraction, monetary disinflation, a worsening of thesupply side, an increase in the world interest rate, and a resourcediscovery are discussed. The transient effects of these policiesfor some of these versions are analysed with the aid of a "multipleshooting" algorithm.

Suggested Citation

  • van de Klundert, Theo C N J & van der Ploeg, Frederick, 1987. "Wage Rigidity and Capital Mobility in an Optimizing Model of a Small Open Economy," CEPR Discussion Papers 168, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:168
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=168
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

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


    Cited by:

    1. van der Ploeg, F., 1990. "Two essays on political economy : (I) The political economy of overvaluation (II) Election outcomes and the stockmarket," Other publications TiSEM e9e7b3e1-bab5-453a-9c77-5, Tilburg University, School of Economics and Management.
    2. Nijman, T.E. & Palm, F.C., 1991. "Generalized least squares estimation of linear models containing rational future expectations," Other publications TiSEM 84eea9d9-bc3c-4d75-97d5-3, Tilburg University, School of Economics and Management.
    3. van der Ploeg, F. & Markink, A.J., 1991. "Dynamic policy in linear models with rational expectations of future events : A computer package," Other publications TiSEM 3acd93c9-b28d-4acb-a750-c, Tilburg University, School of Economics and Management.
    4. van der Ploeg, F. & de Zeeuw, A.J., 1992. "A differential game of international pollution control," Other publications TiSEM 63432fbc-f558-422b-93d9-4, Tilburg University, School of Economics and Management.
    5. Magnus, J.R., 1990. "On the fundamental bordered matrix of linear estimation," Other publications TiSEM b4e18af6-b9d7-49ca-8e07-5, Tilburg University, School of Economics and Management.
    6. van der Ploeg, F., 1990. "Towards monetary integration in Europe," Other publications TiSEM 37eede87-4c89-404f-81a4-6, Tilburg University, School of Economics and Management.
    7. Lex Meijdam & Rudy Stratum, 1990. "Dynamic adjustment and debt accumulation in a small open economy," Journal of Economics, Springer, vol. 51(1), pages 1-26, February.
    8. van der Ploeg, Frederick, 1987. "International Interdependence and Policy Coordination in Economies with Real and Nominal Wage Rigidity," CEPR Discussion Papers 217, C.E.P.R. Discussion Papers.
    9. Deschamps, Philippe J., 1991. "On the Estimated Variances of Regression Coefficients in Misspecified Error Components Models," Econometric Theory, Cambridge University Press, vol. 7(3), pages 369-384, September.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:168. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.