Can Structural Small Open Economy Models Account for the Influence of Foreign Disturbances?

Alejandro Justiniano and Bruce Preston

No 479, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: This paper evaluates whether an estimated, structural, small open economy model of the Canadian economy can account for the substantial influence of foreign-sourced disturbances identified in numerous reduced-form studies. The analysis shows that the benchmark model --- and a number of variants which include a range of market imperfections --- imply cross-equation restrictions that are too stringent when confronted with the data, yielding implausible parameter estimates. While appropriate choice of ad hoc disturbances can relax these cross-equation restrictions and therefore capture certain properties of the data --- for instance, the volatility and persistence of the real exchange rate --- and yield plausible parameter estimates, this success is qualified by the model's inability to account for the transmission of foreign disturbances to the domestic economy: less than one percent of the variance of output is explained by foreign shocks

Keywords: Open Economy; Transmission; Business Cycles (search for similar items in EconPapers)
JEL-codes: F41 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cba
References: Add references at CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
http://www.columbia.edu/~bp2121/noem_new.pdf main text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: Can structural small open-economy models account for the influence of foreign disturbances? (2010)
Working Paper: Can structural small open economy models account for the influence of foreign disturbances? (2009)
Working Paper: Can Structural Small Open Economy Models Account for the Influence of Foreign Disturbances? (2008)
Working Paper: CAN STRUCTURAL SMALL OPEN ECONOMY MODELS ACCOUNT FOR THE INFLUENCE OF FOREIGN DISTURBANCES? (2006)
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:red:sed006:479

Access Statistics for this paper

More papers in 2006 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().