An open economy New-Keynesian model of government spending across U.S. regions

Osti, Davide (2015): An open economy New-Keynesian model of government spending across U.S. regions.

Abstract

We attempt to replicate the New-Keynesian DSGE model presented in Nakamura and Steinsson (American Economic Review 2014) in order to study the effects of a government spending shock on output and other prominent macroeconomic variables, within a simplified two-region monetary union. Two different specifications for the utility function (separable and non-separable à la Greenwood, Hercowitz, and Huffman 1988) are adopted. Perfectly flexible capital markets detained by households are introduced at a regional level first, and then firm specific capital is assumed. After calibrating for the structural parameters, the model is linearly approximated around the steady states, and impulse response functions are derived and commented.

• Item Type: MPRA Paper
• Language: English
• Keywords: open economy relative multiplier; leaning against the wind; Volcker - Greenspan monetary policy; fixed and nominal real interest rate,; military buildups
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; F - International Economics > F2 - International Factor Movements and International Business

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