Convergence, capital accumulation and the nominal exchange rate

Arbeitspapier

This paper develops a flexible price, two-sector nominal growth model, in order to study the role of the exchange rate regime in capital accumulation (convergence). We adopt a standard model of a small open economy with traded and nontraded goods, and enrich its structure with costly investment and a preference for real money holdings. We find that (i) the choice of exchange rate regime influences the transition dynamics of a small open economy, (ii) a one-sector model does not adequately capture the channels through which the nominal side interacts with real variables, and (iii) as a consequence, sectoral asymmetries are important for understanding the effects of the exchange rate regime on capital accumulation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: MNB Working Papers ; No. 2007/2

Classification and Topics

• Classification: Wirtschaft ; Current Account Adjustment; Short-term Capital Movements ; Open Economy Macroeconomics ; Economic Growth of Open Economies
• Subject: two-sector growth model ; small open economy ; capital accumulation ; household portfolios ; real effects of nominal shocks ; Kleine offene Volkswirtschaft ; Investition ; Wechselkurs ; Wechselkurssystem ; Wachstumstheorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Benczúr, Péter ; Kónya, István
• Event: Veröffentlichung
• (who): Magyar Nemzeti Bank
• (where): Budapest
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/83562
• Last update: 10.03.2025, 11:43 AM CET