Computational macroeconomics for the open economy

Policymakers need quantitative as well as qualitative answers to pressing policy questions. Because of advances in computational methods, quantitative estimates are now derived from coherent nonlinear dynamic macroeconomic models embodying measures of risk and calibrated to capture specific characteristics of real-world situations. This text shows how such models can be made accessible and operational for confronting policy issues. The book starts with a simple setting based on market-clearing price flexibility. It gradually incorporates departures from the simple competitive framework in the form of price and wage stickiness, taxes, rigidities in investment, financial frictions, and habit persistence in consumption. Most chapters end with computational exercises; the Matlab code for the base model can be found in the appendix. As the models evolve, readers are encouraged to modify the codes from the first simple model to more complex extensions. Computational Macroeconomics for the Open Economy can be used by graduate students in economics and finance as well as policy-oriented researchers.

Author Notes

G. C. Lim is Professorial Research Fellow at the Melbourne Institute of Applied Economic and Social Research, University of Melbourne. She is the coauthor of Dynamic Economic Models in Discrete Time- Theory and Empirical Applications and An Introduction to Dynamic Economic Models (both with Brian Ferguson).

Paul D. McNelis is Robert Bendheim Chair of Economic and Financial Policy at Fordham University Graduate School of Business Administration. He is the author of Neural Networks in Finance- Gaining Predictive Edge in the Market.

Preface	p. xi
Acknowledgments	p. xv
1 Introduction	p. 1
1.1 The Open Economy Setting	p. 1
1.2 Solution Methods	p. 3
1.3 Policy Goals, Welfare, and Scenarios	p. 13
1.4 Plan of the Book	p. 15
Computational Exercises	p. 17
2 A Small Open Economy Model	p. 19
2.1 Introduction	p. 19
2.2 Flexible Price Model	p. 20
2.3 Solution: Projection Method	p. 28
2.4 Stochastic Dynamic Simulations	p. 32
2.5 Effects of a Demand Shock	p. 39
2.6 Concluding Remarks	p. 43
Computational Exercise: Stochastic Processes	p. 43
3 Sticky Domestic Prices	p. 47
3.1 Introduction	p. 47
3.2 Model with Calvo Pricing	p. 49
3.3 Computational Analysis	p. 53
3.4 Stochastic Simulations	p. 56
3.5 Output Gaps and Sensitivity Analysis	p. 62
3.6 Concluding Remarks	p. 65
Computational Exercise: Output in the Taylor Rule	p. 66
4 Income and Consumption Taxes	p. 69
4.1 Introduction	p. 69
4.2 Model with Taxes	p. 71
4.3 Model Solution	p. 74
4.4 Stochastic Simulations	p. 75
4.5 Scenario Analysis	p. 79
4.6 Concluding Remarks	p. 82
Computational Exercise: Model Validation with VARs	p. 83
5 Current Account Dynamics	p. 85
5.1 Introduction	p. 85
5.2 Model with Endogenous Exports	p. 86
5.3 Computational Analysis	p. 90
5.4 Productivity Shocks	p. 91
5.5 Scenario Analysis	p. 94
5.6 Concluding Remarks	p. 98
Computational Exercise: Real Exchange-Rate Volatility	p. 100
6 Capital and Tobin's Q	p. 103
6.1 Introduction	p. 103
6.2 Model with Capital Accumulation	p. 105
6.3 Solution Algorithm	p. 109
6.4 Stochastic Dynamic Simulations	p. 113
6.5 Scenario Analysis-Q Targeting	p. 114
6.6 Concluding Remarks	p. 117
Computational Exercise: Risk and Q growth	p. 119
7 Economy with Natural Resources	p. 121
7.1 Introduction	p. 121
7.2 Two-Sector Model	p. 122
7.3 Solution Algorithm	p. 127
7.4 Simulation Analysis	p. 128
7.5 Terms-of-Trade Shocks	p. 132
7.6 Concluding Remarks	p. 134
Computational Exercise: Real Exchange Cross-Correlations	p. 135
8 Financial Frictions	p. 139
8.1 Introduction	p. 139
8.2 DSGE Model with Banking	p. 140
8.3 Solution Algorithm	p. 147
8.4 Simulation Analysis	p. 149
8.5 Scenario Analysis	p. 152
8.6 Concluding Remarks	p. 152
Computational Exercise: The "Great Moderation"	p. 153
9 Wage Rigidities	p. 157
9.1 Introduction	p. 157
9.2 Model with Sticky Wages	p. 158
9.3 Solution Algorithm	p. 164
9.4 Simulation Analysis	p. 165
9.5 Sensitivity Analysis	p. 168
9.6 Concluding Remarks	p. 170
Computational Exercise: Dunlop-Tarshis Puzzle	p. 171
10 Habit Persistence	p. 173
10.1 A DSGE Model with Habit Persistence	p. 174
10.2 Solution Algorithm	p. 180
10.3 Stochastic Simulations	p. 181
10.4 Simulating Alternative Scenarios	p. 185
10.5 Concluding Remarks	p. 187
Computational Exercise: Output and Interest Rate	p. 188
11 International Capital Flows and Adjustment	p. 191
11.1 Capital Reversals	p. 192
11.2 Continuing Inflows	p. 194
11.3 Future Research	p. 196
Appendixes
A Definition of Symbols	p. 201
B Definition of Variables	p. 203
C The Computer Algorithm	p. 205
Notes	p. 211
Bibliography	p. 215
Index	p. 225

Mevcut:*

Bound With These Titles

On Order

Özet

Özet

Author Notes

Table of Contents