Volatility of the Tradeable and Non-Tradeable Sectors: Theory and evidence

Laura Povoledo ()
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Laura Povoledo: Department of Economics, University of Reading

No em-dp2007-47, Economics Discussion Papers from Department of Economics, University of Reading

Abstract: This paper investigates the business cycle fluctuations of the tradeable and nontradeable sectors of the US economy. Then, it evaluates whether a 'New Open Economy' model having prices sticky in the producer's currency can reproduce the observed fluctuations qualitatively. The answer is positive: the model-implied standard deviations are consistent with the pattern in the data. In particular, tradeable output is more volatile than nontradeable output. A key role in generating this result is played by the greater responsiveness of tradeable output to monetary shocks. Parameter estimates are obtained by Generalised Method of Moments.

Keywords: New Open Economy Macroeconomics; Tradeable and Nontradeable Sectors; Business Cycles (search for similar items in EconPapers)
JEL-codes: E32 F41 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2007
New Economics Papers: this item is included in nep-cba and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:rdg:emxxdp:em-dp2007-47

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