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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
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http://hdl.handle.net/10419/26097
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| Title: | | A microfounded sectoral model for open economies  |
| Authors: | | Plasmans, Joseph Fornero, Jorge Michalak, Tomasz |
| Issue Date: | | 2007 |
| Series/Report no.: | | CESifo working paper 2052 |
| Abstract: | | 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. |
| JEL: | | E31 D21 F41 P24 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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