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This paper relates the volatility of the (trade-weighted) effective real exchange rate to the degree of trade openness of an economy. The theoretical part presents an intertemporal monetary model with nominal labour (factor) market rigidities. Both monetary and aggregate supply shocks are shown...
Persistent link: https://www.econbiz.de/10005656243
We develop a structural model of a small open economy with gradual exchange rate pass-through and endogenous inertia in inflation and output. We then estimate the model by matching the implied impulse responses with those obtained from a VAR model estimated on Swedish data. Although our model is...
Persistent link: https://www.econbiz.de/10005123761
We compute the impulse response of output to an aggregate monetary shock in a general equilibrium when firms set prices subject to a costly observation of the state and a menu cost. We study how the aggregate effects of a monetary shock depend on the relative size of these costs. We find that...
Persistent link: https://www.econbiz.de/10011083721
We study a model in which prices respond slowly to shocks because firms must pay a fixed cost to observe the determinants of the profit maximizing price, as pioneered by Caballero (1989) and Reis (2006). We extend their analysis to the case of random tran- sitory variation in the firm’s...
Persistent link: https://www.econbiz.de/10011084271
We model the pricing decisions of a multi-product firm that faces a fixed 'menu' cost: once the cost is paid, the firm can adjust the price of all its products. We characterize analytically the steady state firm’s decision in terms of the structural parameters: the variability of the flexible...
Persistent link: https://www.econbiz.de/10011084381
We document the presence of both small and large price changes in individual price records from the CPI in France and the US. After correcting for measurement error and cross-section heterogeneity we find that the size distribution of price changes has a positive excess kurtosis, with a shape...
Persistent link: https://www.econbiz.de/10011084573
This Paper proposes a new framework to analyse systematic and unsystematic monetary policy within the same econometric model. As in Bernanke and Boivin, 2001, the model aims at capturing the following facts: monetary authorities use information from a large number of data series to extract a...
Persistent link: https://www.econbiz.de/10005666484
Although the worldwide growth in dollarization of bank deposits has recently slowed, it has already reached very high …, particularly the response of dollarization to exchange rate changes, which is shown to be too small to warrant ‘fear of floating …’ by dollarized economies. But high dollarization is shown to increase the risk of depreciation and even suspension, as …
Persistent link: https://www.econbiz.de/10005497830
This Paper empirically studies the effect of instrumental and institutional stabilization of the exchange rate on the integration of goods markets. An instrumental stabilization of the exchange rate is accomplished through intervention in the foreign exchange market, or by monetary policies. An...
Persistent link: https://www.econbiz.de/10005661528
produce several departures from the conventional wisdom. We find that a pegged exchange rate or dollarization, while sometimes …
Persistent link: https://www.econbiz.de/10005789083