The Transmission of Domestic Shocks in the Open Economy

Christopher Erceg, Christopher Gust and David Lopez-Salido

No 13613, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper uses an open economy DSGE model to explore how trade openness affects the transmission of domestic shocks. For some calibrations, closed and open economies appear dramatically different, reminiscent of the implications of Mundell-Fleming style models. However, we argue such stark differences hinge on calibrations that impose an implausibly high trade price elasticity and Frisch elasticity of labor supply. Overall, our results suggest that the main effects of openness are on the composition of expenditure, and on the wedge between consumer and domestic prices, rather than on the response of aggregate output and domestic prices.

JEL-codes: E52 F41 F47 (search for similar items in EconPapers)
Date: 2007-11
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
Note: IFM ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Published as Christopher Erceg & Christopher Gust & David López-Salido, 2007. "The Transmission of Domestic Shocks in Open Economies," NBER Chapters, in: International Dimensions of Monetary Policy, pages 89-148 National Bureau of Economic Research, Inc.

Downloads: (external link)
http://www.nber.org/papers/w13613.pdf (application/pdf)

Related works:
Working Paper: The transmission of domestic shocks in the open economy (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:13613

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w13613

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().