scholarly journals The Fiscal Multiplier in Small Open Economy: The Role of Liquidity Frictions

2016 ◽  
Author(s):  
Jasmin Sin
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Fiscal Multiplier ◽  
Liquidity Frictions

scholarly journals Interest Rates, Leverage, and Business Cycles in Emerging Economies: The Role of Financial Frictions

2015 ◽  
Vol 7 (3) ◽  
pp. 153-188 ◽  
Author(s):  
Andrés Fernández ◽  
Adam Gulan
Keyword(s):  
Business Cycles ◽  
Interest Rates ◽  
Open Economy ◽  
Emerging Economies ◽  
Financial Frictions ◽  
Small Open Economy ◽  
Financial Data ◽  
Cycle Model ◽  
Business Cycle Model

Countercyclical country interest rates have been shown to be an important characteristic of business cycles in emerging markets. In this paper we provide a microfounded rationale for this pattern by linking interest rate spreads to the dynamics of corporate leverage. For this purpose we embed a financial accelerator into a business cycle model of a small open economy and estimate it on a novel panel dataset for emerging economies that merges macroeconomic and financial data. The model accounts well for the empirically observed countercyclicality of interest rates and leverage, as well as for other stylized facts. (JEL E13, E32, E43, E44, F41, O11)

Interest rate rules and equilibrium (in)determinacy in a small open economy: the role of internationally traded capital

2018 ◽  
Vol 18 (2) ◽  
Author(s):  
Wen-ya Chang ◽  
Hsueh-fang Tsai ◽  
Juin-jen Chang ◽  
Hsieh-yu Lin
Keyword(s):  
Interest Rate ◽  
Open Economy ◽  
Capital Mobility ◽  
Small Open Economy ◽  
International Capital ◽  
Interest Rate Rules ◽  
International Capital Mobility ◽  
Rate Feedback ◽  
Feedback Rule

Abstract This study develops a small-open-economy version of Benhabib, J., S. Schmitt-Grohé, and M. Uribe. 2001. “Monetary Policy and Multiple Equilibria.” American Economic Review 91: 167–186. We systematically explore the role of international capital mobility and the portfolio balance channel in terms of macroeconomic (in)stability when the government follows a commonly-adopted interest-rate feedback rule. In a one-traded-good model, the steady-state equilibrium, in general, is locally determinate; international capital mobility stabilizes the economy against business cycle fluctuations under a simple interest-rate feedback rule. In a two-good (traded and non-traded goods) model, the relationship between equilibrium (in)determinacy and the aggressiveness of interest rate rules is not monotonic, and crucially depends on households’ portfolio preferences. These results suggest that a unified interest rate rule can end up with very different consequences of macroeconomic (in)stability in an open economy from those in a closed economy.

scholarly journals INEQUALITY AND INTERNATIONAL TRADE: THE ROLE OF SKILL-BIASED TECHNOLOGY AND SEARCH FRICTIONS

2016 ◽  
Vol 21 (3) ◽  
pp. 624-643 ◽  
Author(s):  
Moritz Ritter
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Heterogeneous Firms ◽  
Search Model ◽  
Search Frictions ◽  
Economy Model ◽  
Income Differences ◽  
Skill Groups ◽  
The U.S

I embed a competitive search model of the labor market into a small open economy model with heterogeneous firms and workers. Search frictions generate equilibrium unemployment and income inequality between identical workers, in addition to income differences between skill groups. A quantitative evaluation of the U.S. trade experience suggests that the effect of the increase in goods trade since 1980 may have contributed to the increase in the college premium, but not to the increase in residual inequality.

scholarly journals Nowcasting norwegian GDP: the role of asset prices in a small open economy

2010 ◽  
Vol 42 (1) ◽  
pp. 95-119 ◽  
Author(s):  
Knut Are Aastveit ◽  
Tørres Trovik
Keyword(s):  
Open Economy ◽  
Asset Prices ◽  
Small Open Economy
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