Skip to main content
    • Aa
    • Aa


  • Laura Povoledo (a1)

This note evaluates whether a New Open Economy model can reproduce qualitatively the observed fluctuations of the tradeable and nontradeable sectors of the U.S. economy. The answer is positive: both in the model and in the data, the standard deviations of tradeable inflation, output, and employment are significantly higher than the standard deviations of the corresponding nontradeable sector variables. The key role in generating this result is played by the greater responsiveness of tradeable sector variables to monetary shocks.

Corresponding author
Address correspondence to: Laura Povoledo, Coldharbour Lane, Bristol BS16 1QY, UK; e-mail:
Linked references
Hide All

This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

Robert B. Barsky , Christopher L. House , and Miles S. Kimball (2007) Sticky-price models and durable goods. American Economic Review 97 (3), 984998.

Gianluca Benigno and Christoph Thoenissen (2003) Equilibrium exchange rates and UK supply side performance. Economic Journal 113, 103124.

Pierpaolo Benigno (2009) Price stability with imperfect financial integration. Journal of Money, Credit and Banking 41, 121149.

Paul R. Bergin (2003) Putting the “New Open Economy Macroeconomics” to a test. Journal of International Economics 60, 334.

Caroline Betts and Michael B. Devereux (2000) Exchange rate dynamics in a model of pricing to market. Journal of International Economics 50, 215244.

Craig Burnside , Martin Eichenbaum , and Sergio Rebelo (1993) Labor hoarding and the business cycle. Journal of Political Economy 101 (2), 245273.

Guillermo A. Calvo (1993) Staggered prices in a utility-maximising framework. Journal of Monetary Economics 12 (3), 383398.

José Manuel Campa and Linda S. Goldberg (2005) Exchange rate pass-through into import prices. Review of Economics and Statistics 87 (4), 679690.

V. V. Chari , Patrick J. Kehoe , and Ellen R. McGrattan (2002) Can sticky price models generate volatile and persistent real exchange rates? Review of Economic Studies 69 (3), 533563.

Giancarlo Corsetti and Paolo Pesenti (2005) International dimensions of optimal monetary policy. Journal of Monetary Economics 52 (2), 281305.

Alejandro Justiniano and Bruce Preston (2010a) Can structural small open-economy models account for the influence of foreign disturbances? Journal of International Economics 81 (1), 6174.

Alejandro Justiniano and Bruce Preston (2010b) Monetary policy and uncertainty in an empirical small open-economy model. Journal of Applied Econometrics 25 (1), 93128.

Thomas Lubik and Frank Schorfheide (2007) Do central banks respond to exchange rate movements? A structural investigation. Journal of Monetary Economics 54 (4), 10691087.

Whitney K. Newey and Kenneth D. West (1987) A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica 55 (3), 703708.

Maurice Obstfeld and Kenneth Rogoff (1995) Exchange rate dynamics redux. Journal of Political Economy 103, 624660.

Pau Rabanal and Vicente Tuesta (2010) Euro-dollar real exchange rate dynamics in an estimated two-country model: An assessment. Journal of Economic Dynamics and Control 34 (4), 780797.

Richard Rogerson (1988) Recursive competitive equilibrium in multi-sector economies. International Economic Review 29 (3), 419430.

Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *



Full text views

Total number of HTML views: 0
Total number of PDF views: 10 *
Loading metrics...

Abstract views

Total abstract views: 103 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 25th June 2017. This data will be updated every 24 hours.