A microfounded sectoral model for open economies

Arbeitspapier

In this paper we derive a microfounded macro New Keynesian model for open economies, be them large or small. We consider habit formation in consumption, sectoral linkages for tradable and non-tradable goods, capital stock investments with variable capital utilization, domestic and foreign governments, imperfect (exchange rate) pass-through in import prices and incomplete international financial markets. Sticky nominal prices and wages are modeled in Calvo and Taylor staggered ways. The model economy is composed of a continuum of infinitely-lived consumers and producers of final and intermediate goods. We provide a very general log-linearization method, from which we can easily obtain various special cases, as trend inflation or steady-state log-linearizations. Numerical simulations of the two-country sectoral model are provided for a relatively large number of structural shocks as domestic and foreign productivity shocks in final tradables and non-tradables, money demand shocks and a shock in the exchange rate. Such a model is well suited for monetary policy analysis at the international level and risk analysis.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 2052

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Firm Behavior: Theory ; Open Economy Macroeconomics ; Socialist Systems and Transitional Economies: National Income, Product, and Expenditure; Money; Inflation
• Subject: Ungleichgewichtstheorie ; Offene Volkswirtschaft ; Mehr-Sektoren-Modell ; Handelbares Gut ; Nicht-handelbares Gut ; Vorprodukt ; Mikroökonomische Fundierung ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Plasmans, Joseph ; Fornero, Jorge ; Michalak, Tomasz
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/26097
• Last update: 10.03.2025, 11:44 AM CET