Publication Type

Journal Article

Publication Date

6-2007

Abstract

Open-economy macroeconomics contains a monetary model in the Keynesian tradition that is deemed serviceable for analyzing the short run and a nonmonetary neoclassical model thought capable of handling the long run. But do the Keynesian and neoclassical models meet the challenges thrown out by the main events of the past few decades? We first indicate that the effects of these shocks on the open economy are not well captured by either the standard Keynesian model or the standard neoclassical theory. Next we provide a careful development of a nonmonetary model of the equilibrium path of the real exchange rate, share price level, as well as natural output, employment and interest that contains 'trading frictions' of the customer-market type. We then examine its implications for these shocks not only over the medium run but over the short run and the long run as well.

Keywords

Structuralist model; Share price; Real exchange rate; Employment

Discipline

Econometrics

Research Areas

Applied Microeconomics

Publication

Journal of Macroeconomics

Volume

29

Issue

2

First Page

227

Last Page

254

ISSN

0164-0704

Identifier

10.1016/j.jmacro.2006.11.003

Publisher

Elsevier

Additional URL

http://dx.doi.org/10.1016/j.jmacro.2006.11.003

Included in

Econometrics Commons

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