A Small Structural Monetary Policy Model for Small Open Economies with Debt Accumulation, Issues 2008-2064
International Monetary Fund, Mar 1, 2008 - Business & Economics - 22 pages
We extend a small New Keynesian structural model used for monetary policy analysis to address a richer class of policy issues that arise in open economy analysis. We draw a distinction between absorption and domestic output, and as the difference between the two is effectively the current account, there is now an explicit accumulation or decumulation of foreign liabilities in response to various shocks affecting the system. Such stock equilibria can now have an impact back on to the flows in the domestic economy. We perform simulations using parameters calibrated to the Canadian economy and compare the differences in impulse responses from the original model. Advantages in a forecasting environment owing to the ability to impose explicit projections about imports and exports are also exposed.
What people are saying - Write a review
We haven't found any reviews in the usual places.
Other editions - View all
absorption and domestic address a richer annual inflation rate arise in open Average Growth Rate BKL model Calibrated EBKL Canadian economy class of policy Debt Fully Denominated debt is foreign decumulation of foreign Denominated in Domestic domestic currency Domestic kd domestic output DSGE models equilibrium values Euler equation exchange rate gap explicit accumulation expressed extension external debt Figure forecasting environment owing foreign debt Foreign kf GDP and 95 GDP Gap GNE and GDP GNE gap ignore import gap imports and exports impose explicit projections impulse responses interest rate rule Interest Rate Shock issues that arise Keynesian kfdt log deviation NAFTA nominal exchange rate nominal interest rate oil prices open economy analysis output gap paper permanent component Qt Phillips curve policy issues policy options quarterly real exchange rate real interest rates richer class risk premium Small Open Economies terms of trade Trade Shock UIP equation various shocks affecting