Understanding the Effect of Productivity Changes on International Relative Prices: The Role of News Shocks
| Autor: | Jian Wang, Deokwoo Nam |
|---|---|
| Rok vydání: | 2017 |
| Předmět: |
Macroeconomics
Economics and Econometrics 05 social sciences Monetary economics Relative price Shock (economics) Macroeconomic model Exchange rate Wealth effect 0502 economics and business Dynamic stochastic general equilibrium Economics 050207 economics Total factor productivity Productivity 050205 econometrics |
| Zdroj: | Pacific Economic Review. 23:490-516 |
| ISSN: | 1361-374X |
| Popis: | The terms of trade and the real exchange rate of the US appreciate when the US labor 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 dynamic stochastic general equilibrium (DSGE) model with variable capital utilization can help the model replicate the above empirical finding. Labor 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 prices relative to foreign |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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