Endogenous Trade Participation with Incomplete Exchange Rate Pass-Through
|
|
- Maurice Chapman
- 5 years ago
- Views:
Transcription
1 Endogenous Trade Participation with Incomplete Exchange Rate Pass-Through Yuko Imura Bank of Canada June 28, 23
2 Disclaimer The views expressed in this presentation, or in my remarks, are my own, and do not necessarily represent those of the Bank of Canada. Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 / 9
3 Exporter Characteristics and Dynamics Exporter characteristics Only 2% of US manufacturing plants exported in 992. (Bernard, Eaton, Jensen & Kortum 23) 2-8% more productive, 48% higher capital/worker, 2-45% more employment than non-exporters (Bernard & Jensen 999) Significant export costs 7-7% of a shipment s value (Alessandria et al. 2) Time-varying extensive margin of trade figure Entry rate = 3.9%, exit rate = 2.6% (Bernard & Jensen 24) Incomplete exchange rate pass-through 23% in short run, 42% in long run (Campa & Goldberg 25) Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 / 9
4 Objective This paper studies implications of endogenous trade participation for international business cycles, dynamics of trade participation, and exchange rate pass-through in an environment with nominal rigidities. Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 2 / 9
5 Main Findings With price rigidities, limited adjustments along intensive margin of trade lead to procyclical movements in the number of exporters, resulting in larger responses of export price and trade balance, in contrast to existing studies under flexible prices. Quantitative effect of extensive margin of trade on exchange rate pass-through is negligible, preserving incomplete pass-through in the presence of nominal rigidity. Entry and exit lead relatively more productive firms to dominate the export market. The model explains delayed response of trade balance and terms of trade to currency depreciation, with substantial adjustments along intensive and extensive margins. Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 3 / 9
6 Main Findings With price rigidities, limited adjustments along intensive margin of trade lead to procyclical movements in the number of exporters, resulting in larger responses of export price and trade balance, in contrast to existing studies under flexible prices. Quantitative effect of extensive margin of trade on exchange rate pass-through is negligible, preserving incomplete pass-through in the presence of nominal rigidity. Entry and exit lead relatively more productive firms to dominate the export market. The model explains delayed response of trade balance and terms of trade to currency depreciation, with substantial adjustments along intensive and extensive margins. Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 3 / 9
7 Main Findings With price rigidities, limited adjustments along intensive margin of trade lead to procyclical movements in the number of exporters, resulting in larger responses of export price and trade balance, in contrast to existing studies under flexible prices. Quantitative effect of extensive margin of trade on exchange rate pass-through is negligible, preserving incomplete pass-through in the presence of nominal rigidity. Entry and exit lead relatively more productive firms to dominate the export market. The model explains delayed response of trade balance and terms of trade to currency depreciation, with substantial adjustments along intensive and extensive margins. Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 3 / 9
8 Related Literature Exporter entry and exit Export hysteresis in partial equilibrium Baldwin (988), Baldwin and Krugman (989), Dixit (989) DSGE for business cycles Ghironi and Melitz (25), Alessandria and Choi (27) Incomplete exchange rate pass-through Demand curvature and market structure Atkeson and Burstein (28), Gust, Leduc and Vigfusson (2) Local costs Burstein, Neves and Rebelo (23), Corsetti and Dedola (24) Price rigidities Devereux and Engel (22), Bacchetta and van Wincoop (23) Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 4 / 9
9 Model Overview: Two-country DSGE model Representative household Competitive final-good producers [ D t = ω yt H ] γ ρ [ γ γ ρ (i) γ di + ( ω) yt F i Θ t ] γ γ γ (i) γ di ρ ρ ρ ρ Monopolistically competitive intermediate-good firms Each producing a differentiated product Heterogeneous in prices, productivity, entry costs and continuation costs for exporting These features drive individual firms state-dependent export decisions. Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 5 / 9
10 Model Overview All intermediate-good producers sell in their own country. y t (i) = z t (i)a t K t (i) ν L t (i) ν z t (i) = current firm-specific productivity A t = aggregate productivity To enter the export market, a firm pays entry cost, η G E (η). Upon entering the export market, an entrant sets a new price for its exports. To continue exporting, a firm pays a continuation cost, ξ G(ξ). Price-adjustment hazard increasing in the age of a price Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 6 / 9
11 Potential Entrant Potential entrant with productivity z c drawing entry cost η solves: Vt E (z c, η) = max { +βe t λ t+ λ t max P X,t (zc) n z c= [ P,t(z X c) Q t τy,t(z X c) w tl X,t(z c) r tk,t(z X c) ηw Pt t } π c ch,t+ ( z c, z c, ξ ) ], βe t λ t+ λ t n z c= π c cv E t+(z c, η ) Maximum entry cost η E t (z c ) this firm will pay to enter export market: βe t λ t+ λ t n z π c cv E c= t+(z c, η P,t(z X c) ) = Q t τy,t(z X c) w tl X,t(z c) r tk,t(z X c) P X t η E t (z c)w t + βe t λ t+ λ t n z c= π c ch,t+ ( z c, z c, ξ ) where H,t (z c, z s, ξ) = α V,t(z c, ξ) + ( α )V,t (z c, z s, ξ). Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 7 / 9
12 Price-adjusting Incumbent Price-adjusting incumbent exporter with current productivity z c drawing export cost ξ solves: V,t(z c, ξ) = max { +βe t λ t+ λ t max P X,t (zc) n z c= [ P,t(z X c) Q t τy,t(z X c) w tl X,t(z c) r tk,t(z X c) ξw Pt t } π c ch,t+ ( z c, z c, ξ ) ], βe t λ t+ λ t n z c= π c cv E t+(z c, η ) Max. continuation cost ξ t (z c ) the firm will pay to continue exporting: βe t λ t+ λ t n z π c cv E c= t+(z c, η P,t(z X c) ) = Q t τy,t(z X c) w tl X,t(z c) r tk,t(z X c) P X t ξ t (z c)w t + βe t λ t+ λ t n z c= π c ch,t+ ( z c, z c, ξ ) Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 8 / 9
13 Non-price-adjusting Incumbent Value of non-price-adjusting incumbent of type (z c, j, z s ) drawing continuation cost ξ: V j,t (z c, z s, ξ) = max [ +βe t λ t+ λ t Pj,t(z X s) Q t τyj,t(z X c, z s) w tl X j,t(z c, z s) r tkj,t(z X c, z s) ξw Pt X t ] n z c= π c ch j+,t+ ( z c, z s, ξ ), βe t λ t+ λ t n z c= π c cv E t+(z c, η ) Maximum cost ξ j t (z c, z s ) the firm will pay to continue exporting: βe t λ t+ λ t n z π c cv E c= t+(z c, η Pj,t(z X s) ) = Q t τyj,t(z X c, z s) w tl X j,t(z c, z s) r tkj,t(z X c, z s) P X t ξ j t (z c, z s)w t + βe t λ t+ λ t n z c= π c ch j+,t+ ( z c, z s, ξ ) Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 9 / 9
14 Probabilities of Export Participation Probabilities of entering export market: ζ E t (z c ) = G E ( η E t (z c ) ) for c =,, n z Probabilities of remaining in the export market: a) if adjusting prices ζ t (z c ) = G ( ξ t (z c ) ) for c =,, n z b) if not adjusting prices ( ) ζ j t (z c, z s ) = G ξ j t (z c, z s ) for c =,, n z, s =,, n z and j =,, J evolution Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 / 9
15 Household Representative household chooses C t, L t, K t+, B t+ (s t+ ), and M t : subject to max E t t= β t [log C t + χ log ( Mt P t ) ] + χ 2( L t) P tc t+p ti t+ s t+ q(s t+ s t )B(s t+ )+M t P tw tl t+p tr tk t+b(s t )+M t +P td t+t M t where ( ) It K t+ = ( δ)k t + I t φ K t K t B(s t+ ) = holdings of state-contingent, home-denominated bond q(s t+ s t ) = price of B(s t+ ) in units of home currency in state s t Tt M = lump-sum government transfer = Mt s Mt s Mt s = money supply, Mt s = µ t Mt, s log µ t+ = ρ µ log µ t + ε µ t+ φ( ) = convex capital adjustment cost function, φ(δ) =, φ (δ) = Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 / 9
16 Calibration The model frequency is quarterly. Data Model Sources Mass of exporters.2.2 Bernard et al. (23) Continuation rate Bernard & Jensen (24) Entry rate.4.4 Bernard & Jensen (24) Imports/GDP ratio.2.2 Drozd & Nosal (2) Productivity relative to Bernard & Jensen (999) non-exporters Mean price adjustment Bils & Klenow (24) frequency Nakamura & Steinsson (28) parameters Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 2 / 9
17 Business Cycle Moments Data Model Flex-price Standard deviations relative to GDP Consumption Investment Labor Net exports/gdp Correlations with GDP Consumption Investment Labor Net exports/gdp Autocorrelations GDP Consumption Investment Labor International correlations GDP Consumption Investment Labor Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 3 / 9
18 Business Cycle Moments Data Model Flex-price Standard deviations relative to GDP Consumption Investment Labor Net exports/gdp Correlations with GDP Consumption Investment Labor Net exports/gdp Autocorrelations GDP Consumption Investment Labor International correlations GDP Consumption Investment Labor Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 3 / 9
19 Role of Entry and Exit: Flexible prices.5 exports imports net exports % of output export price index.5 number of exporters real exchange rate entry & exit no entry & exit IRFs Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 4 / 9
20 Role of Entry and Exit: Nominal rigidities.5 exports imports net exports % of output export price index.5 number of exporters real exchange rate entry & exit no entry & exit Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 5 / 9
21 Exchange Rate Pass-Through p X t = α + 8 β n e t n + n= 8 γ n πt n + δ y t + ɛ t n= Pass-through (n) Full Horizon n (quarters) Full model generates short-run incomplete pass-through. Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 6 / 9
22 Exchange Rate Pass-Through p X t = α + 8 β n e t n + n= 8 γ n πt n + δ y t + ɛ t n= Pass-through (n) Full Flex price Horizon n (quarters) With flexible prices, pass-through is complete immediately. Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 6 / 9
23 Exchange Rate Pass-Through p X t = α + 8 β n e t n + n= 8 γ n πt n + δ y t + ɛ t n= Pass-through (n) Full Fixed participation Horizon n (quarters) The added flexibility of endogenous trade participation does not overturn incomplete pass-through arising from nominal rigidity. Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 6 / 9
24 Pass-Through: Composition of exporters Model without entry and exit % of firms Price age j=5 j=4 j=3 j=2 j= j= % of firms Current productivity z c =high z c =low Time Time Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 7 / 9
25 Pass-Through: Composition of exporters Model without entry and exit % of firms Price age j=5 j=4 j=3 j=2 j= j= % of firms Current productivity z c =high z c =low Time Time % of firms Model with entry and exit % of firms Time Time Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 7 / 9
26 Effects of monetary policy and currency movements Money growth shock Net exports.5.5 Real exchange rate Exports Terms of trade Imports % of output Number of exporters (Home) Number of exporters (Foreign) Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 8 / 9
27 Conclusion In the presence of price rigidity, endogenous trade participation influences international business cycles, in contrast to earlier findings under flexible prices. This suggests that market structure and pricing conventions may be critical in analyzing the role of exporter entry and exit for aggregate dynamics and international transmission of shocks. Endogenous trade participation and incomplete exchange rate pass-through have important implications for the effects of currency movements and the conduct of monetary policy at both micro and macro levels. Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 9 / 9
28 Exporter Dynamics 3 Number of exporters RGDP 4 Number of exporters (in thousands) Real GDP (in trillion $) Year Back Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 2 / 4
29 Final-Good Producer Final-good producers combine home- and foreign-produced intermediate goods to produce final goods D t. y H t max P td t (i),yf t (i) Pt D (i)yt H (i)di Pt X i Θ t (i)y F t (i)di subject to D t = [ ω ] γ ρ [ yt H (i) γ γ ρ γ di + ( ω) yt F (i) γ γ di i Θ t ] γ γ ρ ρ ρ ρ γ = elasticity of substitution b/w goods produced in the same country ρ = elasticity of substitution b/w home and foreign goods Θ t = time-varying set of foreign goods available in home country P t = consumer price index Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 / 4
30 Intermediate-Good Firm: Domestic market Price-adjusting firm with current productivity z c chooses P D,t(z c ): V D,t(z c) = max P D,t (zc) +βe t λ t+ λ t { P,t(z D c) y,t(z D c) w tl D,t(z c) r tk,t(z D c) Pt D ]} n z n z α π c cv,t+(z c) D + ( α ) π c cv,t+ D (z c, z c) [ c= c= α j = probability of price adjustment for firms with j-period old price π c c = probability of moving from z = z c to z = z c Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 2 / 4
31 Intermediate-Good Firm: Domestic market Value of non-price-adjusting firm of type (z c, j, z s ) V D j,t (z c, z s) = P j,t(z D s) yj,t(z D c, z s) w tl D j,t(z c, z s) r tkj,t(z D c, z s) P D t +βe t λ t+ λ t [ α j+ n z c= π c cv D ] n z,t+(z c) + ( α j+) π c cv j+,t+ D (z c, z s) c= z c = current productivity j = number of periods since the price was last set z s = productivity at the time of last price adjustment Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 3 / 4
32 Evolution of the distribution of domestic firms θ j,t (z c, z s ) = Number of firms starting date t as type (z c, j, z s ) Evolution for non-price adjusting firms: n z θ j+,t+ (z c, z s ) = ( α j ) π c c θ j,t (z c, z s ) c= Total number of firms starting t + as (z c,, z s ): J n z θ,t+ (z c, z s ) = π s c α j θ j,t (z s, z s ). j= s= Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 4 / 4
33 Evolution of the distribution of exporters ψ j,t (z c, z s ) = Number of incumbents starting t as type (z c, j, z s ) Evolution for non-price-adjusting incumbents: n z ψ j+,t+(z c, z s) = ( α j) ζ j t (z c, z s) π c c ψ j,t(z c, z s) c= Total number of exporters of type (z c,, z s ): J n z ψ,t+(z c, z s) = π s c ζt (z s) α j ψ j,t(z s, z s) j= s= }{{} adjusting incumbents surviving time t + π s c N E t (z s) }{{} entrants at time t Number of entrants with productivity z c at t: [ J ] n z J n z Nt E (z c) = ζt E (z c) θ j,t(z c, z s) ψ j,t(z c, z s) j= s= j= s= Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 5 / 4 Back
34 Price Index. Price index for domestically-produced goods [ J n z n z Pt D = α jθ j,t(z c, z s)p,t(z D c) γ j= c= s= ] J n z n z + ( α j)θ j,t(z c, z s)pj,t(z D s) γ j= c= s= 2. Price index for imported goods P X t = [ nz c= Nt E (z c)p,t X (z c) γ + J n z n z j= c= s= γ α j ζt (z c)ψj,t(z c, z s)p,t X (z c) γ ] J n z n z γ + ( α j) ζ j (z c, z s) ψj,t(z c, z s) Pj,t X (z s) γ j= c= s= 3. Price index for all the goods available in home country [ ( ) ρ ( ) ] ρ P t = ω ρ Pt D + ω ρ 2 Pt X ρ t Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 6 / 4
35 Parameter Values Discount factor β.99 Weight on leisure in utility χ 2.9 s.s. labor =.33 Elasticity of substitution γ 3.8 Ghironi & Melitz (25) Armington elasticity ρ.5 BKK(995) Capital share in production ν.3 Depreciation rate of capital δ.25 % depreciation/year Iceberg trade cost τ.5 # of firm-specific productivity levels n z 2 Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 7 / 4
36 Calibrated parameters Home bias ω.762 Entry costs U (, η U ) η U 2.8 Continuation costs U (, ξ U ) ξ U.7 Firm-specific productivity: ρ z.8 log z = ρ z log z + ɛ, ɛ N(, σ ɛ ) σ ɛ.85 Price adjustment probability α j [.5,.9,.25,.49,.7,.] Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 8 / 4
37 Shock processes Productivity (Backus, Kehoe and Kydland, 995) [ ] [ ] [ ] [ At At ε A A = t A + t t ε A t where var(ε A t ) = var(ε A t ) = (.7) 2, corr ( ε A t, ε A t ] ) =.258 Money growth (Chari, Kehoe and McGrattan, 22) [ ] [ ] [ ] [ µt.68 µt ε µ ] µ = t.68 µ t + t ε µ t where µ =.4 /4 I choose var(ε µ t ) = var(ε µ t ) so that σ Y =.42 in baseline model. Back Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 9 / 4
38 Steady state Sticky Flexible Data EE No EE EE No EE Entry and exit Mass of exporters Continuation rate.97/qtr Entry rate.4/qtr.4.4 Exporter productivity relative to nonexporters Imports/GDP ratio Mean price duration qtrs Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 / 4
39 Impulse responses: Flexible-price model 2 output.8 consumption labor investment.5 capital rental rate export price index number of exporters.6 number of new exporters.5 number of exiting exporters Home net exports.8 real exchange rate productivity shock % of output Home country Foreign country Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 / 4
40 Impulse responses: Sticky-price model.5 output.8 consumption labor investment capital rental rate export price index number of exporters 2 number of new exporters 5 number of exiting exporters Home net exports.4 real exchange rate productivity shock % of output Home country Foreign country Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 2 / 4 back
41 Policy, exchange rate and trade % change % change from yr from ago yr ago M M Terms of 988 trade Terms of trade billion billion $ $ US dollar index Trade balance Trade balance US dollar index Yuko Imura (Bank of Canada) Endogenous Trade Participation June 23 3 / 4
The Extensive Margin of Trade and Monetary Policy
The Extensive Margin of Trade and Monetary Policy Yuko Imura Bank of Canada Malik Shukayev University of Alberta June 2, 216 The views expressed in this presentation are our own, and do not represent those
More informationThe Extensive Margin of Trade and Monetary Policy
Staff Working Paper/Document de travail du personnel 8-37 The Extensive Margin of Trade and Monetary Policy Yuko Imura and Malik Shukayev Bank of Canada staff working papers provide a forum for staff to
More informationHeterogeneous Firm, Financial Market Integration and International Risk Sharing
Heterogeneous Firm, Financial Market Integration and International Risk Sharing Ming-Jen Chang, Shikuan Chen and Yen-Chen Wu National DongHwa University Thursday 22 nd November 2018 Department of Economics,
More informationNontradable Goods, Market Segmentation, and Exchange Rates
Nontradable Goods, Market Segmentation, and Exchange Rates Michael Dotsey Federal Reserve Bank of Philadelphia Margarida Duarte Federal Reserve Bank of Richmond September 2005 Preliminary and Incomplete
More informationWORKING PAPER NO NONTRADED GOODS, MARKET SEGMENTATION, AND EXCHANGE RATES. Michael Dotsey Federal Reserve Bank of Philadelphia.
WORKING PAPER NO. 06-9 NONTRADED GOODS, MARKET SEGMENTATION, AND EXCHANGE RATES Michael Dotsey Federal Reserve Bank of Philadelphia and Margarida Duarte Federal Reserve Bank of Richmond May 2006 Nontraded
More informationHousehold Debt, Financial Intermediation, and Monetary Policy
Household Debt, Financial Intermediation, and Monetary Policy Shutao Cao 1 Yahong Zhang 2 1 Bank of Canada 2 Western University October 21, 2014 Motivation The US experience suggests that the collapse
More informationEntry, Trade Costs and International Business Cycles
Entry, Trade Costs and International Business Cycles Roberto Fattal and Jose Lopez UCLA SED Meetings July 10th 2010 Entry, Trade Costs and International Business Cycles SED Meetings July 10th 2010 1 /
More informationNot All Oil Price Shocks Are Alike: A Neoclassical Perspective
Not All Oil Price Shocks Are Alike: A Neoclassical Perspective Vipin Arora Pedro Gomis-Porqueras Junsang Lee U.S. EIA Deakin Univ. SKKU December 16, 2013 GRIPS Junsang Lee (SKKU) Oil Price Dynamics in
More informationFrequency of Price Adjustment and Pass-through
Frequency of Price Adjustment and Pass-through Gita Gopinath Harvard and NBER Oleg Itskhoki Harvard CEFIR/NES March 11, 2009 1 / 39 Motivation Micro-level studies document significant heterogeneity in
More informationLecture 4. Extensions to the Open Economy. and. Emerging Market Crises
Lecture 4 Extensions to the Open Economy and Emerging Market Crises Mark Gertler NYU June 2009 0 Objectives Develop micro-founded open-economy quantitative macro model with real/financial interactions
More informationInternational Banks and the Cross-Border Transmission of Business Cycles 1
International Banks and the Cross-Border Transmission of Business Cycles 1 Ricardo Correa Horacio Sapriza Andrei Zlate Federal Reserve Board Global Systemic Risk Conference November 17, 2011 1 These slides
More informationA Small Open Economy DSGE Model for an Oil Exporting Emerging Economy
A Small Open Economy DSGE Model for an Oil Exporting Emerging Economy Iklaga, Fred Ogli University of Surrey f.iklaga@surrey.ac.uk Presented at the 33rd USAEE/IAEE North American Conference, October 25-28,
More informationGroupe de Travail: International Risk-Sharing and the Transmission of Productivity Shocks
Groupe de Travail: International Risk-Sharing and the Transmission of Productivity Shocks Giancarlo Corsetti Luca Dedola Sylvain Leduc CREST, May 2008 The International Consumption Correlations Puzzle
More informationWORKING PAPER NO ESTABLISHMENT HETEROGENEITY, EXPORTER DYNAMICS, AND THE EFFECTS OF TRADE LIBERALIZATION
WORKING PAPER NO. 11-19 ESTABLISHMENT HETEROGENEITY, EXPORTER DYNAMICS, AND THE EFFECTS OF TRADE LIBERALIZATION George Alessandria Federal Reserve Bank of Philadelphia Horag Choi Monash University April
More informationState-Dependent Pricing and the Paradox of Flexibility
State-Dependent Pricing and the Paradox of Flexibility Luca Dedola and Anton Nakov ECB and CEPR May 24 Dedola and Nakov (ECB and CEPR) SDP and the Paradox of Flexibility 5/4 / 28 Policy rates in major
More informationMultinational Firms, Trade, and the Trade-Comovement Puzzle
Multinational Firms, Trade, and the Trade-Comovement Puzzle Gautham Udupa CAFRAL December 11, 2018 Motivation Empirical research: More trade between countries associated with increase in business cycle
More informationBank Capital Requirements: A Quantitative Analysis
Bank Capital Requirements: A Quantitative Analysis Thiên T. Nguyễn Introduction Motivation Motivation Key regulatory reform: Bank capital requirements 1 Introduction Motivation Motivation Key regulatory
More informationUncertainty Shocks In A Model Of Effective Demand
Uncertainty Shocks In A Model Of Effective Demand Susanto Basu Boston College NBER Brent Bundick Boston College Preliminary Can Higher Uncertainty Reduce Overall Economic Activity? Many think it is an
More informationA Macroeconomic Model with Financial Panics
A Macroeconomic Model with Financial Panics Mark Gertler, Nobuhiro Kiyotaki, Andrea Prestipino NYU, Princeton, Federal Reserve Board 1 March 218 1 The views expressed in this paper are those of the authors
More informationA Model with Costly-State Verification
A Model with Costly-State Verification Jesús Fernández-Villaverde University of Pennsylvania December 19, 2012 Jesús Fernández-Villaverde (PENN) Costly-State December 19, 2012 1 / 47 A Model with Costly-State
More informationDual Wage Rigidities: Theory and Some Evidence
MPRA Munich Personal RePEc Archive Dual Wage Rigidities: Theory and Some Evidence Insu Kim University of California, Riverside October 29 Online at http://mpra.ub.uni-muenchen.de/18345/ MPRA Paper No.
More informationUnconventional Monetary Policy
Unconventional Monetary Policy Mark Gertler (based on joint work with Peter Karadi) NYU October 29 Old Macro Analyzes pre versus post 1984:Q4. 1 New Macro Analyzes pre versus post August 27 Post August
More informationMonetary Economics. Financial Markets and the Business Cycle: The Bernanke and Gertler Model. Nicola Viegi. September 2010
Monetary Economics Financial Markets and the Business Cycle: The Bernanke and Gertler Model Nicola Viegi September 2010 Monetary Economics () Lecture 7 September 2010 1 / 35 Introduction Conventional Model
More informationHabit Formation in State-Dependent Pricing Models: Implications for the Dynamics of Output and Prices
Habit Formation in State-Dependent Pricing Models: Implications for the Dynamics of Output and Prices Phuong V. Ngo,a a Department of Economics, Cleveland State University, 22 Euclid Avenue, Cleveland,
More informationNoise Traders, Exchange Rate Disconnect Puzzle, and the Tobin Tax
Noise Traders, Exchange Rate Disconnect Puzzle, and the Tobin Tax September 2008 Abstract This paper proposes a framework to explain why the nominal and real exchange rates are highly volatile and seem
More informationECON 4325 Monetary Policy and Business Fluctuations
ECON 4325 Monetary Policy and Business Fluctuations Tommy Sveen Norges Bank January 28, 2009 TS (NB) ECON 4325 January 28, 2009 / 35 Introduction A simple model of a classical monetary economy. Perfect
More informationWORKING PAPER NO ESTABLISHMENT HETEROGENEITY, EXPORTER DYNAMICS, AND THE EFFECTS OF TRADE LIBERALIZATION
WORKING PAPER NO. 07-17 ESTABLISHMENT HETEROGENEITY, EXPORTER DYNAMICS, AND THE EFFECTS OF TRADE LIBERALIZATION George Alessandria Federal Reserve Bank of Philadelphia and Horag Choi University of Auckland
More informationWORKING PAPER NO DO FALLING ICEBERG COSTS EXPLAIN RECENT U.S. EXPORT GROWTH? George Alessandria Federal Reserve Bank of Philadelphia
WORKING PAPER NO. 10-10 DO FALLING ICEBERG COSTS EXPLAIN RECENT U.S. EXPORT GROWTH? George Alessandria Federal Reserve Bank of Philadelphia Horag Choi University of Auckland March 2010 Do Falling Iceberg
More informationThe Risky Steady State and the Interest Rate Lower Bound
The Risky Steady State and the Interest Rate Lower Bound Timothy Hills Taisuke Nakata Sebastian Schmidt New York University Federal Reserve Board European Central Bank 1 September 2016 1 The views expressed
More informationFiscal Policy and Regional Inflation in a Currency Union
Fiscal Policy and Regional Inflation in a Currency Union Margarida Duarte Alexander L. Wolman February 25 Abstract This paper investigates the ability of a region participating in a currency union to affect
More informationInternational Trade Fluctuations and Monetary Policy
International Trade Fluctuations and Monetary Policy Fernando Leibovici York University Ana Maria Santacreu St. Louis Fed and INSEAD August 14 Abstract This paper studies the role of trade openness for
More informationRisky Mortgages in a DSGE Model
1 / 29 Risky Mortgages in a DSGE Model Chiara Forlati 1 Luisa Lambertini 1 1 École Polytechnique Fédérale de Lausanne CMSG November 6, 21 2 / 29 Motivation The global financial crisis started with an increase
More informationState Dependency of Monetary Policy: The Refinancing Channel
State Dependency of Monetary Policy: The Refinancing Channel Martin Eichenbaum, Sergio Rebelo, and Arlene Wong May 2018 Motivation In the US, bulk of household borrowing is in fixed rate mortgages with
More informationECON 815. A Basic New Keynesian Model II
ECON 815 A Basic New Keynesian Model II Winter 2015 Queen s University ECON 815 1 Unemployment vs. Inflation 12 10 Unemployment 8 6 4 2 0 1 1.5 2 2.5 3 3.5 4 4.5 5 Core Inflation 14 12 10 Unemployment
More informationOn the new Keynesian model
Department of Economics University of Bern April 7, 26 The new Keynesian model is [... ] the closest thing there is to a standard specification... (McCallum). But it has many important limitations. It
More informationA Macroeconomic Model with Financial Panics
A Macroeconomic Model with Financial Panics Mark Gertler, Nobuhiro Kiyotaki, Andrea Prestipino NYU, Princeton, Federal Reserve Board 1 September 218 1 The views expressed in this paper are those of the
More informationMonetary Policy and the Predictability of Nominal Exchange Rates
Monetary Policy and the Predictability of Nominal Exchange Rates Martin Eichenbaum Ben Johannsen Sergio Rebelo Disclaimer: The views expressed here are those of the authors and do not necessarily reflect
More informationUnderstanding International Prices:Customers as Capital
Understanding International Prices: Customers as Capital Lukasz A. Drozd 1 Jaromir B. Nosal 2 1 University of Wisconsin-Madison 2 Columbia University Fundamental features of international price data Aggregate
More informationMacroeconomics 2. Lecture 6 - New Keynesian Business Cycles March. Sciences Po
Macroeconomics 2 Lecture 6 - New Keynesian Business Cycles 2. Zsófia L. Bárány Sciences Po 2014 March Main idea: introduce nominal rigidities Why? in classical monetary models the price level ensures money
More informationThe Eurozone Debt Crisis: A New-Keynesian DSGE model with default risk
The Eurozone Debt Crisis: A New-Keynesian DSGE model with default risk Daniel Cohen 1,2 Mathilde Viennot 1 Sébastien Villemot 3 1 Paris School of Economics 2 CEPR 3 OFCE Sciences Po PANORisk workshop 7
More informationThe New Keynesian Model
The New Keynesian Model Noah Williams University of Wisconsin-Madison Noah Williams (UW Madison) New Keynesian model 1 / 37 Research strategy policy as systematic and predictable...the central bank s stabilization
More informationThe Role of Firm-Level Productivity Growth for the Optimal Rate of Inflation
The Role of Firm-Level Productivity Growth for the Optimal Rate of Inflation Henning Weber Kiel Institute for the World Economy Seminar at the Economic Institute of the National Bank of Poland November
More informationHousehold income risk, nominal frictions, and incomplete markets 1
Household income risk, nominal frictions, and incomplete markets 1 2013 North American Summer Meeting Ralph Lütticke 13.06.2013 1 Joint-work with Christian Bayer, Lien Pham, and Volker Tjaden 1 / 30 Research
More informationSharing the Burden: Monetary and Fiscal Responses to a World Liquidity Trap David Cook and Michael B. Devereux
Sharing the Burden: Monetary and Fiscal Responses to a World Liquidity Trap David Cook and Michael B. Devereux Online Appendix: Non-cooperative Loss Function Section 7 of the text reports the results for
More informationMoney, Sticky Wages, and the Great Depression
Money, Sticky Wages, and the Great Depression American Economic Review, 2000 Michael D. Bordo 1 Christopher J. Erceg 2 Charles L. Evans 3 1. Rutgers University, Department of Economics 2. Federal Reserve
More informationUninsured Unemployment Risk and Optimal Monetary Policy
Uninsured Unemployment Risk and Optimal Monetary Policy Edouard Challe CREST & Ecole Polytechnique ASSA 2018 Strong precautionary motive Low consumption Bad aggregate shock High unemployment Low output
More informationTaxing Firms Facing Financial Frictions
Taxing Firms Facing Financial Frictions Daniel Wills 1 Gustavo Camilo 2 1 Universidad de los Andes 2 Cornerstone November 11, 2017 NTA 2017 Conference Corporate income is often taxed at different sources
More informationThe Basic New Keynesian Model
Jordi Gali Monetary Policy, inflation, and the business cycle Lian Allub 15/12/2009 In The Classical Monetary economy we have perfect competition and fully flexible prices in all markets. Here there is
More informationOptimal monetary policy when asset markets are incomplete
Optimal monetary policy when asset markets are incomplete R. Anton Braun Tomoyuki Nakajima 2 University of Tokyo, and CREI 2 Kyoto University, and RIETI December 9, 28 Outline Introduction 2 Model Individuals
More informationProduct Cycles and Prices: Search Foundation
Product Cycles and Prices: Search Foundation Mei Dong 1 Yuki Teranishi 2 1 University of Melbourne 2 Keio University and CAMA, ANU April 2018 1 / 59 In this paper, we Show a fact for product cycles and
More informationInflation Dynamics During the Financial Crisis
Inflation Dynamics During the Financial Crisis S. Gilchrist 1 R. Schoenle 2 J. W. Sim 3 E. Zakrajšek 3 1 Boston University and NBER 2 Brandeis University 3 Federal Reserve Board Theory and Methods in Macroeconomics
More informationEconomic stability through narrow measures of inflation
Economic stability through narrow measures of inflation Andrew Keinsley Weber State University Version 5.02 May 1, 2017 Abstract Under the assumption that different measures of inflation draw on the same
More informationOptimal Monetary Policy in a Two Country Model with Firm-Level Heterogeneity *
Federal Reserve Bank of Dallas Globalization and Monetary Policy Institute Working Paper No.104 http://www.dallasfed.org/assets/documents/institute/wpapers/2012/0104.pdf Optimal Monetary Policy in a Two
More informationGroupe de Recherche en Économie et Développement International. Cahier de recherche / Working Paper 09-02
Groupe de Recherche en Économie et Développement International Cahier de recherche / Working Paper 9-2 Inflation Targets in a Monetary Union with Endogenous Entry Stéphane Auray Aurélien Eyquem Jean-Christophe
More informationA Simple DSGE Model of Banking Industry Dynamics
A Simple DSGE Model of Banking Industry Dynamics Akio Ino University of Wisconsin - Madison December 12, 217 Abstract In this paper I introduce imperfect competition and entry and exit in the banking sector
More informationReserve Requirements and Optimal Chinese Stabilization Policy 1
Reserve Requirements and Optimal Chinese Stabilization Policy 1 Chun Chang 1 Zheng Liu 2 Mark M. Spiegel 2 Jingyi Zhang 1 1 Shanghai Jiao Tong University, 2 FRB San Francisco ABFER Conference, Singapore
More informationUniversity of Toronto Department of Economics. How Important is the Currency Denomination of Exports in Open-Economy Models?
University of Toronto Department of Economics Working Paper 383 How Important is the Currency Denomination of Exports in Open-Economy Models? By Michael Dotsey and Margarida Duarte November 20, 2009 How
More informationProbably Too Little, Certainly Too Late. An Assessment of the Juncker Investment Plan
Probably Too Little, Certainly Too Late. An Assessment of the Juncker Investment Plan Mathilde Le Moigne 1 Francesco Saraceno 2,3 Sébastien Villemot 2 1 École Normale Supérieure 2 OFCE Sciences Po 3 LUISS-SEP
More informationMacroeconomics. Basic New Keynesian Model. Nicola Viegi. April 29, 2014
Macroeconomics Basic New Keynesian Model Nicola Viegi April 29, 2014 The Problem I Short run E ects of Monetary Policy Shocks I I I persistent e ects on real variables slow adjustment of aggregate price
More informationBalance Sheet Recessions
Balance Sheet Recessions Zhen Huo and José-Víctor Ríos-Rull University of Minnesota Federal Reserve Bank of Minneapolis CAERP CEPR NBER Conference on Money Credit and Financial Frictions Huo & Ríos-Rull
More informationA Model of Financial Intermediation
A Model of Financial Intermediation Jesús Fernández-Villaverde University of Pennsylvania December 25, 2012 Jesús Fernández-Villaverde (PENN) A Model of Financial Intermediation December 25, 2012 1 / 43
More informationReal Business Cycles in Emerging Countries?
Real Business Cycles in Emerging Countries? Javier García-Cicco, Roberto Pancrazi and Martín Uribe Published in American Economic Review (2010) Presented by Onursal Bağırgan Real Business Cycles in Emerging
More informationConvergence, capital accumulation and the nominal exchange rate
Convergence, capital accumulation and the nominal exchange rate Péter Benczúr and István Kónya Magyar Nemzeti Bank and Central European University September 2 Disclaimer The views expressed are those of
More informationAggregate Implications of Lumpy Adjustment
Aggregate Implications of Lumpy Adjustment Eduardo Engel Cowles Lunch. March 3rd, 2010 Eduardo Engel 1 1. Motivation Micro adjustment is lumpy for many aggregates of interest: stock of durable good nominal
More informationAsset Prices, Collateral and Unconventional Monetary Policy in a DSGE model
Asset Prices, Collateral and Unconventional Monetary Policy in a DSGE model Bundesbank and Goethe-University Frankfurt Department of Money and Macroeconomics January 24th, 212 Bank of England Motivation
More informationQuality, Variable Mark-Ups, and Welfare: A Quantitative General Equilibrium Analysis of Export Prices
Quality, Variable Mark-Ups, and Welfare: A Quantitative General Equilibrium Analysis of Export Prices Haichao Fan Amber Li Sichuang Xu Stephen Yeaple Fudan, HKUST, HKUST, Penn State and NBER May 2018 Mark-Ups
More informationThe Employment and Output Effects of Short-Time Work in Germany
The Employment and Output Effects of Short-Time Work in Germany Russell Cooper Moritz Meyer 2 Immo Schott 3 Penn State 2 The World Bank 3 Université de Montréal Social Statistics and Population Dynamics
More informationOil Price Uncertainty in a Small Open Economy
Yusuf Soner Başkaya Timur Hülagü Hande Küçük 6 April 212 Oil price volatility is high and it varies over time... 15 1 5 1985 199 1995 2 25 21 (a) Mean.4.35.3.25.2.15.1.5 1985 199 1995 2 25 21 (b) Coefficient
More informationMONETARY POLICY REGIMES AND CAPITAL ACCOUNT RESTRICTIONS IN A SMALL OPEN ECONOMY
MONETARY POLICY REGIMES AND CAPITAL ACCOUNT RESTRICTIONS IN A SMALL OPEN ECONOMY ZHENG LIU AND MARK M. SPIEGEL Abstract. The recent financial crisis has led to large declines in world interest rates and
More informationAchieving Actuarial Balance in Social Security: Measuring the Welfare Effects on Individuals
Achieving Actuarial Balance in Social Security: Measuring the Welfare Effects on Individuals Selahattin İmrohoroğlu 1 Shinichi Nishiyama 2 1 University of Southern California (selo@marshall.usc.edu) 2
More informationInnovation, Firm Dynamics, and International Trade
Innovation, Firm Dynamics, and International Trade Andrew Atkeson, UCLA and Minneapolis Fed Ariel Burstein, UCLA November 10, 2009 tkeson and Burstein ()Innovation, dynamics, international trade November
More informationUniversity of Toronto Department of Economics. Nontraded Goods, Market Segmentation, and Exchange Rates
University of Toronto Department of Economics Working Paper 338 Nontraded Goods, Market Segmentation, and Exchange Rates By Michael Dotsey and Margarida Duarte October 01, 2008 Nontraded Goods, Market
More informationWhy are Banks Exposed to Monetary Policy?
Why are Banks Exposed to Monetary Policy? Sebastian Di Tella and Pablo Kurlat Stanford University Bank of Portugal, June 2017 Banks are exposed to monetary policy shocks Assets Loans (long term) Liabilities
More informationExplaining International Business Cycle Synchronization: Recursive Preferences and the Terms of Trade Channel
1 Explaining International Business Cycle Synchronization: Recursive Preferences and the Terms of Trade Channel Robert Kollmann Université Libre de Bruxelles & CEPR World business cycle : High cross-country
More informationExtended DSGE Model of the Czech Economy
Zbyněk Štork Božena Bobková Ilkin Aliyev Moderní nástroje pro finanční analýzu a modelování 5. 6. 214 Outline 1 Extended DSGE model 2 3 Simulation 4 Outline 1 Extended DSGE model 2 3 Simulation 4 Outline
More informationDistortionary Fiscal Policy and Monetary Policy Goals
Distortionary Fiscal Policy and Monetary Policy Goals Klaus Adam and Roberto M. Billi Sveriges Riksbank Working Paper Series No. xxx October 213 Abstract We reconsider the role of an inflation conservative
More informationReal Exchange Rate Dynamics With Endogenous Distribution Services (Preliminary and Incomplete)
Real Exchange Rate Dynamics With Endogenous Distribution Services (Preliminary and Incomplete) Millan L. B. Mulraine First Version: December 25 Current Version: December 25 Abstract This paper demonstrates
More informationInternational Development and Firm Distribution
International Development and Firm Distribution Ping Wang Department of Economics Washington University in St. Louis February 2016 1 A. Introduction Conventional macroeconomic models employ aggregate production
More informationCredit Frictions and Optimal Monetary Policy
Credit Frictions and Optimal Monetary Policy Vasco Cúrdia FRB New York Michael Woodford Columbia University Conference on Monetary Policy and Financial Frictions Cúrdia and Woodford () Credit Frictions
More informationForeign Competition and Banking Industry Dynamics: An Application to Mexico
Foreign Competition and Banking Industry Dynamics: An Application to Mexico Dean Corbae Pablo D Erasmo 1 Univ. of Wisconsin FRB Philadelphia June 12, 2014 1 The views expressed here do not necessarily
More informationReserve Accumulation, Macroeconomic Stabilization and Sovereign Risk
Reserve Accumulation, Macroeconomic Stabilization and Sovereign Risk Javier Bianchi 1 César Sosa-Padilla 2 2018 SED Annual Meeting 1 Minneapolis Fed & NBER 2 University of Notre Dame Motivation EMEs with
More informationD10.4 Theoretical paper: A New Keynesian DSGE model with endogenous sovereign default
MACFINROBODS 612796 FP7 SSH 2013 2 D10.4 Theoretical paper: A New Keynesian DSGE model with endogenous sovereign default Project acronym: MACFINROBODS Project full title: Integrated Macro Financial Modelling
More informationTrade Costs, Pricing to Market, and International Relative Prices
Trade Costs, Pricing to Market, and International Relative Prices Andrew Atkeson and Ariel Burstein February, 24 25 Abstract We extend some of the recently developed models of international trade to study
More informationInternational Prices and Exchange Rates Gita Gopinath
International Prices and Exchange Rates Gita Gopinath Nominal and Real Exchange Rates Exchange-rate pass-through and expenditure switching Currency Wars, Fear of Floating 1 / 72 Non-neutrality of Nominal
More informationIdiosyncratic risk and the dynamics of aggregate consumption: a likelihood-based perspective
Idiosyncratic risk and the dynamics of aggregate consumption: a likelihood-based perspective Alisdair McKay Boston University March 2013 Idiosyncratic risk and the business cycle How much and what types
More informationNBER WORKING PAPER SERIES TRADE ADJUSTMENT DYNAMICS AND THE WELFARE GAINS FROM TRADE. George Alessandria Horag Choi Kim Ruhl
NBER WORKING PAPER SERIES TRADE ADJUSTMENT DYNAMICS AND TE WELFARE GAINS FROM TRADE George Alessandria orag Choi Kim Ruhl Working Paper 20663 http://www.nber.org/papers/w20663 NATIONAL BUREAU OF ECONOMIC
More informationTechnology shocks and Monetary Policy: Assessing the Fed s performance
Technology shocks and Monetary Policy: Assessing the Fed s performance (J.Gali et al., JME 2003) Miguel Angel Alcobendas, Laura Desplans, Dong Hee Joe March 5, 2010 M.A.Alcobendas, L. Desplans, D.H.Joe
More informationCountry Spreads and Emerging Countries: Who Drives Whom? Martin Uribe and Vivian Yue (JIE, 2006)
Country Spreads and Emerging Countries: Who Drives Whom? Martin Uribe and Vivian Yue (JIE, 26) Country Interest Rates and Output in Seven Emerging Countries Argentina Brazil.5.5...5.5.5. 94 95 96 97 98
More informationMoney and monetary policy in Israel during the last decade
Money and monetary policy in Israel during the last decade Money Macro and Finance Research Group 47 th Annual Conference Jonathan Benchimol 1 This presentation does not necessarily reflect the views of
More informationInternational Macroeconomics and Finance Session 4-6
International Macroeconomics and Finance Session 4-6 Nicolas Coeurdacier - nicolas.coeurdacier@sciences-po.fr Master EPP - Fall 2012 International real business cycles - Workhorse models of international
More informationMicrofoundations of DSGE Models: III Lecture
Microfoundations of DSGE Models: III Lecture Barbara Annicchiarico BBLM del Dipartimento del Tesoro 2 Giugno 2. Annicchiarico (Università di Tor Vergata) (Institute) Microfoundations of DSGE Models 2 Giugno
More informationEfficient Bailouts? Javier Bianchi. Wisconsin & NYU
Efficient Bailouts? Javier Bianchi Wisconsin & NYU Motivation Large interventions in credit markets during financial crises Fierce debate about desirability of bailouts Supporters: salvation from a deeper
More informationExamining the Bond Premium Puzzle in a DSGE Model
Examining the Bond Premium Puzzle in a DSGE Model Glenn D. Rudebusch Eric T. Swanson Economic Research Federal Reserve Bank of San Francisco John Taylor s Contributions to Monetary Theory and Policy Federal
More informationBank Capital, Agency Costs, and Monetary Policy. Césaire Meh Kevin Moran Department of Monetary and Financial Analysis Bank of Canada
Bank Capital, Agency Costs, and Monetary Policy Césaire Meh Kevin Moran Department of Monetary and Financial Analysis Bank of Canada Motivation A large literature quantitatively studies the role of financial
More informationInternational Macroeconomics - Session II
International Macroeconomics - Session II Tobias Broer IIES Stockholm Doctoral Program in Economics Acknowledgement This lecture draws partly on lecture notes by Morten Ravn, EUI Key definitions and concepts
More informationFinancial Development and the Effects of Trade Liberalizations
Financial Development and the Effects of Trade Liberalizations David Kohn Pontificia Universidad Católica de Chile Fernando Leibovici Federal Reserve Bank of St. Louis Michal Szkup University of British
More informationHealth Care Reform or Labor Market Reform? A Quantitative Analysis of the Affordable Care Act
Health Care Reform or Labor Market Reform? A Quantitative Analysis of the Affordable Care Act Makoto Nakajima 1 Didem Tüzemen 2 1 Federal Reserve Bank of Philadelphia 2 Federal Reserve Bank of Kansas City
More informationThe CAPM Strikes Back? An Investment Model with Disasters
The CAPM Strikes Back? An Investment Model with Disasters Hang Bai 1 Kewei Hou 1 Howard Kung 2 Lu Zhang 3 1 The Ohio State University 2 London Business School 3 The Ohio State University and NBER Federal
More informationDoes the Optimal Monetary Policy Matter for the Current Account Dynamics
Does the Optimal Monetary Policy Matter for the Current Account Dynamics Min Lu University of British Columbia Draft May 5 Abstract This paper explores how monetary policies affect the current account
More informationInternational Trade Gravity Model
International Trade Gravity Model Yiqing Xie School of Economics Fudan University Dec. 20, 2013 Yiqing Xie (Fudan University) Int l Trade - Gravity (Chaney and HMR) Dec. 20, 2013 1 / 23 Outline Chaney
More information