Anatomizing incomplete-markets small open economies: policy trade-offs and equilibrium determinacy
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Alonso-Carrera, Jaime; Kam, Timothy
Description
We propose a simple incomplete-markets small-open-economy model that is amenable to analytical dissection of its policy-relevant mechanisms. In contrast to its complete-markets limit, the equilibrium real exchange rate is irreducible from the incomplete-markets equilibrium. Market incompleteness exacerbates the domestic-inflation and output-gap monetary-policy trade-off in two ways: its steepness and its resulting endogenous cost-push to the trade-off. The latter depends on an equilibrium...[Show more]
Collections | ANU Research Publications |
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Date published: | 2015-05-05 |
Type: | Journal article |
URI: | http://hdl.handle.net/1885/15287 |
Source: | Macroeconomic Dynamics |
DOI: | 10.1017/S1365100514000728 |
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File | Description | Size | Format | Image |
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Alonso-Carrera and Kam Anatomizing Incomplete Markets 2015.pdf | Author/s accepted manuscript (AAM/post-print) | 385.44 kB | Adobe PDF | ![]() |
CUP_Incomplete Markets 2015.pdf | Published version | 274.82 kB | Adobe PDF | ![]() Request a copy |
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