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The Volatility of the Tradeable and Nontradeable Sectors: Theory and Evidence

Author

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  • Laura Povoledo

    () (UWE, Bristol)

Abstract

This 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: both in the model and in the data the standard deviations of tradeable inflation, output and employment are significantly higher than the standard deviations of the corresponding nontradeable sector variables. A key role in generating this result is played by the greater responsiveness of tradeable sector variables to monetary shocks.

Suggested Citation

  • Laura Povoledo, 2009. "The Volatility of the Tradeable and Nontradeable Sectors: Theory and Evidence," Working Papers 0906, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  • Handle: RePEc:uwe:wpaper:0906
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    File URL: http://carecon.org.uk/DPs/0906.pdf
    File Function: First version, 2009
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    Cited by:

    1. repec:cje:issued:v:50:y:2017:i:3:p:685-710 is not listed on IDEAS
    2. Laura Povoledo, 2017. "Modelling the sectoral allocation of labour in open economy models," Canadian Journal of Economics, Canadian Economics Association, vol. 50(3), pages 685-710, August.

    More about this item

    Keywords

    New Open Economy Macroeconomics; Tradeable and Nontradeable Sectors; Business Cycles.;

    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

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