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Simulation, estimation and welfare implications of monetary policies in a 3-country NOEM model

Joseph Plasmans (), Tomasz Michalak and Jorge Fornero

No 94, Working Paper Research from National Bank of Belgium

Abstract: In this paper we derive a microfounded macro New Keynesian model for open economies, be them large or small. We consider habit formation in consumption, sectoral linkages, domestic and foreign governments, tradable and non-tradable final and intermediate goods and imperfect pass-through in these sectors. Sticky nominal prices and wages are modeled in a Calvo way. The model economy is composed of a continuum of infinitely-lived consumers and producers for three regions (countries). Numerical simulations and econometric estimations are presented with a focus on a small open economy member of the EMU. Welfare implications of the involved price and wage rigidities are discussed

Keywords: New Keynesian open economy model; tradable and non-tradable sectors; final and intermediate goods; monetary policy rules; numerical simulations; Bayesian estimation; welfare implications (search for similar items in EconPapers)
JEL-codes: E31 D21 F41 P24 (search for similar items in EconPapers)
Pages: 74 pages
Date: 2006-10
New Economics Papers: this item is included in nep-cba and nep-mac
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Handle: RePEc:nbb:reswpp:200610-6