Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83308
Authors: 
Maršál, Aleš
Year of Publication: 
2011
Series/Report no.: 
IES Working Paper 7/2011
Abstract: 
I lay out small open economy model with nominal rigidities to study the implication of model dynamics on the term structure of interest rates. It has been shown that in order to obtain at least moderate match simultaneously of the macro and finance data, one has to introduce long-memory habits in consumption together with a large number of highly persistent exogenous shocks. These elements of the model however worsen the fit of macro data. I find that in the open economy framework the foreign demand channel allows us to match some of the data features even without including habits and a large number of exogenous shocks.
Subjects: 
DSGE small open economy model
term structure of interest rates
perturbation method
second order approximation
JEL: 
G12
E17
Document Type: 
Working Paper
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