Open-Economy Implications of Two Models of Business Fluctuations / Alan C. Stockman, Ai Tee Koh.

Format:

Book

Author/Creator:

Stockman, Alan C.

Contributor:

National Bureau of Economic Research.

Koh, Ai Tee.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1317.

NBER working paper series no. w1317

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1984.

Summary:

This paper shows how open-economy implications of alternative business-cycle models can be used to discriminate between those models. Open-economy versions of two well-known models are presented: a model with predetermined nominal wages and a model in which nominal disturbances are misperceived as real disturbances. In the former model applied to a small economy with flexible exchange rates, an unanticipated increase in the money supply increases output of both traded and nontraded goods, lowers the relative price of nontraded goods, and inducesa current-account surplus. In the latter model, an unperceived increase in the money supply increases output of nontraded goods but reduces output of traded goods, raises the relative price of nontraded goods, and induces a current-account deficit.

Notes:

Print version record

March 1984.