Povoledo, Laura (2009): The Volatility of the Tradeable and Nontradeable Sectors: Theory and Evidence.
This is the latest version of this item.
Download (796Kb) | Preview
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 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.
|Item Type:||MPRA Paper|
|Institution:||University of Reading|
|Original Title:||The Volatility of the Tradeable and Nontradeable Sectors: Theory and Evidence|
|Keywords:||New Open Economy Macroeconomics; Tradeable and Nontradeable Sectors; Business Cycles.|
|Subjects:||F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
|Depositing User:||Laura Povoledo|
|Date Deposited:||16. Jun 2010 00:10|
|Last Modified:||16. Feb 2013 05:28|
Benigno, Gianluca, and Christoph Thoenissen. (2003). "Equilibrium Exchange Rates and UK Supply Side Performance." Economic Journal 113, 103-124.
Benigno, Pierpaolo. (2009). "Price Stability with Imperfect Financial Integration." Journal of Money, Credit and Banking 41, 121-149.
Bergin, Paul R. (2003). "Putting the 'New Open Economy Macroeconomics' to a test." Journal of International Economics 60, 3-34.
Betts, Caroline, and Michael B. Devereux. (2000). "Exchange Rate Dynamics in a Model of Pricing to Market." Journal of International Economics 50, 215-244.
Betts, Caroline and Timothy J. Kehoe. (2006). "U.S. Real Exchange Rate Fluctuations and Relative Price Fluctuations." Journal of Monetary Economics 53, 1297-1326.
Burnside, Craig, Martin Eichenbaum, and Sergio Rebelo. (1993). "Labor Hoarding and the Business Cycle." Journal of Political Economy 101:2, 245-273.
Calvo, Guillermo A. (1993). "Staggered Prices in a Utility-Maximising Framework." Journal of Monetary Economics 12:3, 383-398.
Campa, José Manuel, and Linda S. Goldberg. (2005). "Exchange Rate Pass-Through into Import Prices." The Review of Economics and Statistics 87:4, 679-690.
Campbell, Leith, and Simon Wren-Lewis. (2007). "The Optimal Monetary Policy Response to Exchange Rate Misalignments." Economics Series Working Papers 305, University of Oxford, Department of Economics.
Canova, Fabio. (2005). "The Transmission of US Shocks to Latin America." Journal of Applied Econometrics 20:2, 229-251.
Canova, Fabio. (2007). "Methods for Applied Macroeconomics Research." Princeton: Princeton University Press.
Chari, V. V., Patrick J. Kehoe, and Ellen R. McGrattan. (2002). "Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?" Review of Economic Studies 69:3, 533-63.
Corsetti, Giancarlo, and Paolo Pesenti. (2005). "International dimensions of optimal monetary policy." Journal of Monetary Economics 52:2, 281-305.
Doyle, Brian M., Christopher J. Erceg, and Andrew T. Levin. (unpublished). "Monetary policy rules in economies with traded and non-traded goods."
Faruqee, Hamid, Douglas Laxton, Dirk Muir, and Paolo Pesenti. (2005). "Smooth Landing or Crash? Model-Based Scenarios of Global Current Account Rebalancing." NBER Working Papers 11583, National Bureau of Economic Research.
Galí, Jordi, Mark Gertler, and David Lopez-Salido. (2001). "European Inflation Dynamics." European Economic Review 45, 1237-1270.
Ganley, Joe, and Chris Salmon. (1997). "The industrial impact of monetary policy shocks: some stylised facts." Bank of England Working Paper Series 68.
Ghironi, Fabio. (2000). "Towards new open economy macroeconometrics." Federal Reserve Bank of New York, Staff Reports No. 100.
Hodrick, Robert J., and Edward C. Prescott. (1997). "Postwar U.S. Business Cycles: An Empirical Investigation." Journal of Money, Credit, and Banking 29, 1-16.
Kydland, Finn E., and Edward C. Prescott. (1982). "Time to Build and Aggregate Fluctuations." Econometrica 50:6, 1345-70.
Lane, Philip R. (2001). "The New Open Economy Macroeconomics: A Survey." Journal of International Economics 54, 235-266.
Llaudes, Ricardo. (2007). "Monetary policy shocks in a two-sector open economy: an empirical study." Working Paper Series 799, European Central Bank.
Lubik, Thomas, and Frank Schorfheide. (2005). "A Bayesian Look at New Open Economy Macroeconomics." In NBER Macroeconomics Annual, 2005, edited by Ben S. Bernanke and Kenneth Rogoff, pp. 313-366.
Newey, Whitney K. and Kenneth D. West. (1987). "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix." Econometrica 55:3, 703-08.
Obstfeld, Maurice, and Kenneth Rogoff. (1995). "Exchange Rate Dynamics Redux." Journal of Political Economy 103, 624-660.
Obstfeld, Maurice, and Kenneth Rogoff. (2004). "The Unsustainable US Current Account Position Revisited." NBER Working Papers 10869, National Bureau of Economic Research, November 2004.
Obstfeld, Maurice, and Kenneth Rogoff. (2005). "Global Current Account Imbalances and Exchange Rate Adjustments." In Brookings Papers on Economic Activity, 2005 Vol. 1, edited by William Brainard and George Perry, pp. 67-146.
Prescott, Edward C. (1986). "Theory Ahead of Business Cycle Measurement." Carnegie-Rochester Conference Series on Public Policy 25, 11-44. Also in: Federal Reserve Bank of Minneapolis Quarterly Review 10:4, 9-22.
Rogerson, Richard. (1988). "Recursive Competitive Equilibrium in Multi-Sector Economies." International Economic Review 29:3, 419-430.
Schmitt-Grohe, Stephanie and Martin Uribe. (2003). "Closing Small Open Economy Models." Journal of International Economics, 61:1, 163-185.
Smets, Frank, and Raf Wouters. (2003). "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area." Journal of the European Economic Association 1, 1123-1175.
Uhlig, Harald. (1999). "A Toolkit for Analizing Nonlinear Dynamic Stochastic Models Easily." In Computational Methods for the Study of Dynamic Economies, edited by Ramon Marimon and Andrew Scott, pp. 30-61. Oxford: Oxford University Press.
Available Versions of this Item
The Volatility of the Tradeable and Nontradeable Sectors: Theory and Evidence. (deposited 28. Apr 2009 05:04)
- The Volatility of the Tradeable and Nontradeable Sectors: Theory and Evidence. (deposited 16. Jun 2010 00:10) [Currently Displayed]