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In this paper a Dynamic Stochastic General Equilibrium model in the New Keynesian tradition is developed for two open economies, namely: an advanced and an emerging one. A critical distinction between the economies under study rests on the location of financial frictions: while imperfections will af...
In this paper a Dynamic Stochastic General Equilibrium model in the New Keynesian tradition is developed for two open economies, namely: an advanced and an emerging one. A critical distinction between the economies under study rests on the location of financial frictions: while imperfections will affect the domestic credit market in the advanced economy, it is the foreign exhange market that will be subject to frictions in the emerging one. There is also a distinction related to the monetary policy carried out by each Central Bank: the monetary authority in the developed economy directs its policy to monitor the condition of its own financial sector, while the Central Bank in emerging economy focus its efforts on regulating the evolution of external payments and the exchange rate.
Item Description:
Paper presentado al Arnoldshain Seminar "20 years of challenges for integration, globalization, and development" September 14-18, 2015 Frankfurt and Arnoldshain / Taunus.