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2 edition of Factor price rigidities in an open economy found in the catalog.

Factor price rigidities in an open economy

Richard Cornes

Factor price rigidities in an open economy

by Richard Cornes

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Published by University of Warwick, Dept. of Economics in Coventry .
Written in English


Edition Notes

Statementby Richard Cornes.
SeriesWarwick economic research papers -- no.160
ContributionsUniversity of Warwick. Department of Economics.
ID Numbers
Open LibraryOL14866558M

1. Introduction Exchange rates and commodity prices are among the most volatile variables in an open-economy macroe-conomics.1 Much theoretical research has been devoted to understanding the causes of exchange rate volatility and to explaining its macroeconomic effects. 2. A New Keynesian Open Economy Model Our benchmark model is very similar to the small open economy model of Clarida, Galí, and Gertler (). Households consume a domestic and foreign good that are imperfect substitutes. To rationalize Calvo-style price rigidities, the domestic good is assumed to be a comprised of a.

  It therefore follows that if the cutoff Θ d in the closed economy is larger than Θ min, so is Θ d in the open economy. 26 Finally, note that yields (21) equations (20) and (21) can be used for solving the four cutoffs as functions of labour market frictions and cost parameters, as illustrated in Figure by: In Search of Real Rigidities Gita Gopinath, Oleg Itskhoki. NBER Working Paper No. Issued in June NBER Program(s):Economic Fluctuations and Growth, International Finance and Macroeconomics, Monetary Economics The closed and open economy literatures work on evaluating the role of real rigidities, but in parallel.

  In mainstream macro today, Keynesian economics is synonymous with the macroeconomics of price rigidity. Most of the time I have no problem with that. All the evidence suggests there is significant inertia in aggregate prices, and it is very difficult to tell realistic stories about how inflation moves without taking this into : Mainly Macro. Computational Macroeconomics for the Open Economy can be used by graduate students in economics and finance as well as policy-oriented researchers. Hardcover $ X | £ ISBN: pp. | 6 in x 9 in 76 figures, 22 tables October


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Factor price rigidities in an open economy by Richard Cornes Download PDF EPUB FB2

Downloadable. The objective of this paper is to analyze some issues raised by exogenous determination of factor prices in an open economy. To do this, we exploit the tools of duality analysis, particularly the restricted profic function. Some of these ideas have been discussed by Brecher () and Schweinberger ().

Our treatment is closer in spirit to that of. The impact of an unanticipated monetary shock in a small open economy with dollarization, factor price rigidities, and nontradeables is re-examined in an optimizing intertemporal general equilibrium by: 1.

The book starts with a simple setting based on market-clearing price flexibility. It gradually incorporates departures from the simple competitive framework in the form of price and wage stickiness, taxes, rigidities in investment, financial frictions, and habit persistence in Cited by: The impact of an unanticipated monetary shock in a small open economy with dollarization, factor price rigidities, and nontradeables is re-examined.

Exchange rate determination: The role of factor price rigidities and nontradeables Article in Journal of International Economics 50(2) April with. line illus. 72 tables. line illus. 72 tables. Combining theoretical models and data in ways unimaginable just a few years ago, open economy macroeconomics has experienced enormous growth over the past several decades.

This rigorous and self-contained textbook brings graduate students, scholars, and policymakers to the research frontier. The impact of an unanticipated monetary shock in a small open economy with dollarization, factor price rigidities, and nontradeables is re-examined in an optimizing intertemporal general equilibrium : Vadims Sarajevs.

First, we introduce factor markets (similar to Blanchard and Kiyotaki, ) and assume that nominal rigidities originate in sticky factor prices (wages). 1 Historically, nominal factor price (or wage) rigidities have played a central role in theories of monetary by: Price rigidities.

In the early seventies, motivated by the potential role of price rigidities for enhancing risk-sharing efficiency, Jacques Drèze undertook to define equilibria with price rigidities and quantity constraints and to study their properties in a general equilibrium context. His paper (36, circulated in ) Alma mater: Université de Liège.

An open economy is a type of economy where not only domestic actors but also entities in other countries engage in trade of products (goods and services). Trade can take the form of managerial exchange, technology transfers, and all kinds of goods and services.

(However, certain exceptions exist that cannot be exchanged; the railway services of a country, for. the costs of food, housing, books, tuition that a student could have purchased.

After the price level increased sharply and bythe price level had increased by a factor of 25 over its value in B. In an open economy, if the United States government were to purchase computer paper; according to the crowding out effect.

Blanchard (who is the Economic Counselor and Director of Research at the International Monetary Fund "IMF") presents a unified and global view of macroeconomics, enabling students to see the connections between the short-run, medium-run, and long-run. Technological problems and growth, financial markets and expectations, the goods market in an open economy, Reviews: 1.

This study analyzes the implications of the monetary policy for the unemployment rate in a small open economy. We introduce nominal wage rigidities and unemployment into the small open economy version of the dynamic stochastic general equilibrium model.

We Author: Hyuk Jae Rhee, Jeongseok Song. Real rigidity. In macroeconomics, rigidities are real prices and wages that fail to adjust to the level indicated by equilibrium or if something holds one price or. The price at which the means of production (that is, land, labor, capital and sometimes entrepreneurship) are sold.

Economists disagree about what determines factor prices. Marxists and classical economists argue that factor prices represent the intrinsic value of the means of production. Other economists, however, believe that factor prices come from demand for the. The Basic New Keynesian Model 2 costs of adjusting those prices.

The same kind of friction applies to workers in the presence of sticky wages. Short run non-neutrality of monetary policy: As a consequence of nominal rigidities, changes in short term nominal interest rates are not matched by one-for-one changes in expectedFile Size: 1MB. IMPACT FACTOR 5-year IMPACT FACTOR: CiteScore SCImago Journal Rank (SJR) Source Normalized Impact per Paper (SNIP) See all formats and pricing OnlineCited by: Downloadable (with restrictions).

We present a model embodying moderate amounts of nominal rigidities which accounts for the observed inertia in inflation and persistence in output. The key features of our model are those that prevent a sharp rise in marginal costs after an expansionary shock to monetary policy.

Of these features, the most important are staggered wage contracts. The estimated factor demand equation is complemented by adding indicators for the level of education and market rigidities to the list of explanatory variables.

In general, the literature review suggests that there is no consensus on the magnitude and role of nominal rigidities in the estimated price-setting process. Although, price is not the only factor that creates an efficient allocation of resources so the significance of prices in comparison to the other factors needs to be accounted for.

Price Stickiness. In general terms, price stickiness is apparent and dependent on certain types of good as it varies on length of time. An increase in unemployment is, however, compatible with the traditional trade theory if we, for example, extend a Heckscher-Ohlin type model to allow for some factor price inflexibility as shown by Davis or, adding trade in intermediate inputs, by Egger and Kreickemeier.

The reason is that trade typically leads to a decrease in the relative Cited by: 1.tions is that prices are sticky and thus respond sluggishly to shocks affecting the nominal exchange rate. SinceChari et al.(), an extensive literature has evaluated this ex-planation quantitatively using Sticky Price Open Economy (SPOE) models.

Under some extensions, these models have been successful in replicating the properties of the real.Currently, one of the most important aims of research in this field is to find the so-called 'optimal rate of inflation', which is understood as the rate of inflation at which barriers to price changes (rigidities) are overcome with the low cost of inflation (mainly in form of an impact on growth and unemployment); in other words, an optimal rate of inflation promotes the flexibility of the economic .