IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Convergence, capital accumulation and the nominal exchange rate

  • Péter Benczúr

    ()

    (Magyar Nemzeti Bank)

  • István Kónya

    ()

    (Magyar Nemzeti Bank)

This paper develops a flexible price, two-sector nominal growth model, in order to study the role of the exchange rate regime in capital accumulation (convergence). We adopt a standard model of a small open economy with traded and nontraded goods, and enrich its structure with costly investment and a preference for real money holdings. We find that (i) the choice of exchange rate regime influences the transition dynamics of a small open economy, (ii) a one-sector model does not adequately capture the channels through which the nominal side interacts with real variables, and (iii) as a consequence, sectoral asymmetries are important for understanding the effects of the exchange rate regime on capital accumulation.

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://english.mnb.hu/Root/Dokumentumtar/MNB/Kiadvanyok/mnbhu_mnbfuzetek/mnbhu_wp2007_2/wp2007_2.pdf
Download Restriction: no

Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Working Papers with number 2007/2.

as
in new window

Length: 40 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:mnb:wpaper:2007/2
Contact details of provider: Web page: http://www.mnb.hu/

More information through EDIRC

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. Jose De Gregorio & Alberto Giovannini, 1993. "International Evidence on Tradables and Nontradable Inflation," NBER Working Papers 4438, National Bureau of Economic Research, Inc.
  2. Chang-Tai Hsieh & Peter J. Klenow, 2003. "Relative prices and relative prosperity," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  3. Cedric Tille, 2005. "Financial Integration and the Wealth Effect of Exchange Rate Fluctuations," 2005 Meeting Papers 282, Society for Economic Dynamics.
  4. Vasco Cúrdia & Michael Woodford, 2010. "The central-bank balance sheet as an instrument of monetary policy," Staff Reports 463, Federal Reserve Bank of New York.
  5. Huffman, Gregory W. & Wynne, Mark A., 1999. "The role of intratemporal adjustment costs in a multisector economy," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 317-350, April.
  6. Philip R. Lane & Gian Maria Milesi-Ferretti, 2006. "The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities,1970–2004," The Institute for International Integration Studies Discussion Paper Series iiisdp126, IIIS.
  7. Rebelo, Sérgio, 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," CEPR Discussion Papers 1220, C.E.P.R. Discussion Papers.
  8. Eichenbaum, Martin & Fisher, Jonas D.M., 2007. "Estimating the frequency of price re-optimization in Calvo-style models," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 2032-2047, October.
  9. Alan C. Stockman & Linda L. Tesar, 1990. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," NBER Working Papers 3566, National Bureau of Economic Research, Inc.
  10. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2004. "Financial Globalization and Exchange Rates," CEPR Discussion Papers 4745, C.E.P.R. Discussion Papers.
  11. Jason G. Cummins & Kevin A. Hassett & Stephen D. Oliner, 1999. "Investment behavior, observable expectations, and internal funds," Finance and Economics Discussion Series 1999-27, Board of Governors of the Federal Reserve System (U.S.).
  12. Bart Hobijn & Federico Ravenna & Andrea Tambalotti, 2004. "Menu costs at work: restaurant prices and the introduction of the euro," Staff Reports 195, Federal Reserve Bank of New York.
  13. Stephanie Schmitt-Grohe & Martin Uribe, 2002. "Closing Small Open Economy Models," NBER Working Papers 9270, National Bureau of Economic Research, Inc.
  14. de Cordoba, Gonzalo Fernandez & Kehoe, Timothy J., 2000. "Capital flows and real exchange rate fluctuations following Spain's entry into the European Community," Journal of International Economics, Elsevier, vol. 51(1), pages 49-78, June.
  15. Wallace, Neil, 1981. "A Modigliani-Miller Theorem for Open-Market Operations," American Economic Review, American Economic Association, vol. 71(3), pages 267-74, June.
  16. Mark Aguiar & Gita Gopinath, 2004. "Emerging Market Business Cycles: The Cycle is the Trend," NBER Working Papers 10734, National Bureau of Economic Research, Inc.
  17. Javier Garcia-Cicco & Roberto Pancrazi & Martin Uribe, 2010. "Real Business Cycles in Emerging Countries?," American Economic Review, American Economic Association, vol. 100(5), pages 2510-31, December.
  18. repec:nbr:nberre:0126 is not listed on IDEAS
  19. Cummins, J.G. & Hassett, K.A. & Hubbard, R.G., 1995. "tax Reforms and Investment: A Cross-Country Comparison," Working Papers 95-28, C.V. Starr Center for Applied Economics, New York University.
  20. Sergio Rebelo & Ariel Burstein & Martin Eichenbaum, 2004. "Large Devaluations and the Real Exchange Rate," 2004 Meeting Papers 137, Society for Economic Dynamics.
  21. Gourinchas, Pierre-Olivier & Rey, Hélène, 2005. "International Financial Adjustment," CEPR Discussion Papers 4923, C.E.P.R. Discussion Papers.
  22. Fiorito, Riccardo & Kollintzas, Tryphon, 1992. "Stylized Facts of Business Cycles in the G7 from a Real Business Cycles Perspective," CEPR Discussion Papers 681, C.E.P.R. Discussion Papers.
  23. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  24. Bems, Rudolfs & Jönsson, Kristian, 2005. "Trade Deficits in the Baltic States: How Long Will the Party Last?," Working Paper Series 186, Sveriges Riksbank (Central Bank of Sweden).
  25. Fabio Canova & Tobias Menz, 2011. "Does Money Matter in Shaping Domestic Business Cycles? An International Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(4), pages 577-607, 06.
  26. Michael B. Devereux & Alan Sutherland, 2011. "Country Portfolios In Open Economy Macro‐Models," Journal of the European Economic Association, European Economic Association, vol. 9(2), pages 337-369, 04.
  27. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  28. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  29. Enrique G. Mendoza, 2010. "Sudden Stops, Financial Crises, and Leverage," American Economic Review, American Economic Association, vol. 100(5), pages 1941-66, December.
  30. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  31. Gil Bufman & Leonardo Leidennan, 1995. "Israel's Stabilization: Some Important Policy Lessons," NBER Chapters, in: Reform, Recovery, and Growth: Latin America and the Middle East, pages 177-222 National Bureau of Economic Research, Inc.
  32. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sectoral Level," IEHAS Discussion Papers 0803, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  33. Benigno, Pierpaolo, 2001. "Optimal Monetary Policy in a Currency Area," CEPR Discussion Papers 2755, C.E.P.R. Discussion Papers.
  34. Balsam, A. & Eckstein, Z., 2001. "Real Business Cycles in a Small Open Economy with Non-Traded Goods," Papers 2001-3, Tel Aviv.
  35. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  36. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:mnb:wpaper:2007/2. 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: (Maja Bajcsy)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.