Price rigidity, the mark-up and the dynamics of the current account

Giovanni Lombardo

No 2002,14, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: This paper shows that the degree of competition affects the current account response to nominal shocks. The mechanism hinges on the relationship between the mark-up and the degree of real rigidity of prices. In a model with intermediate goods, the degree of real rigidity increases in the markup. A weaker response of prices to nominal shocks strengthens the 'expenditure switching' effect of the devaluation to the benefit of the current account. We first analyse the relationship between the mark-up and the real rigidity in a simple closed economy model. We then show numerically how the mark-up can affect the response of the current account to monetary shocks.

Keywords: Current account; mark-up; monopolistic competition; persistence; real rigidity; nominal rigidity (search for similar items in EconPapers)
JEL-codes: E32 F32 (search for similar items in EconPapers)
Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/19571/1/200214dkp.pdf (application/pdf)

Related works:
Journal Article: Price rigidity, the mark-up, and the dynamics of the current account (2002)
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:zbw:bubdp1:4179

Access Statistics for this paper

More papers in Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().