Understanding the Effect of Productivity Changes on International Relative Prices: The Role of News Shocks
- Title
- Understanding the Effect of Productivity Changes on International Relative Prices: The Role of News Shocks
- Author
- 남덕우
- Keywords
- BUSINESS CYCLES; MONETARY-POLICY; AGGREGATE FLUCTUATIONS; INTEREST-RATES; TRADE; RULES; FRAMEWORK; RETURNS; ECONOMY; MODELS
- Issue Date
- 2018-08
- Publisher
- WILEY
- Citation
- PACIFIC ECONOMIC REVIEW, v. 23, no. 3, page. 490-516
- Abstract
- The US real exchange rate and terms of trade have been found to appreciate when US labour productivity increases relative to the rest of the world. This finding is at odds with predictions from standard international macroeconomic models. In this paper, we find that incorporating news shocks to total factor productivity (TFP) in an otherwise standard open-economy sticky-price dynamic stochastic general equilibrium (DSGE) model with variable capital utilization can help the model replicate the above empirical finding. Labour productivity increases in our model after a positive news shock to TFP because of an increase in capital utilization. Under some plausible calibrations, the wealth effect of good news about future productivity can increase domestic demand strongly and induce an increase in home goods prices relative to foreign goods prices.
- URI
- https://onlinelibrary.wiley.com/doi/abs/10.1111/1468-0106.12200https://repository.hanyang.ac.kr/handle/20.500.11754/119823
- ISSN
- 1361-374X; 1468-0106
- DOI
- 10.1111/1468-0106.12200
- Appears in Collections:
- COLLEGE OF ECONOMICS AND FINANCE[S](경제금융대학) > ECONOMICS & FINANCE(경제금융학부) > Articles
- Files in This Item:
There are no files associated with this item.
- Export
- RIS (EndNote)
- XLS (Excel)
- XML