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on Open Economy Macroeconomics |
| By: | Olivier CARDI; Romain RESTOUT |
| Abstract: | The contractionary effect of aggregate technology shocks on hours worked has shrunk over time in OECD countries. Our estimates suggest that this finding can be attributed to the increasing share of the variance of technology improvements driven by asymmetric technology shocks across sectors. While technology improvements uniformly distributed across sectors are found empirically to give rise to a dramatic decline in total hours worked, asymmetric technology shocks do the opposite. By depreciating non-traded prices, symmetric technology shocks generate a contractionary effect on non-traded labor and thus on total hours. In contrast, by appreciating non-traded prices, technological change concentrated toward traded industries puts upward pressure on wages which has a strong expansionary effect on total hours worked. A two-sector open economy model with frictions into the movements of inputs can reproduce the time -increasing response of both total and sectoral hours worked we estimate empirically once we allow for factor-biased technological change and we let the share of asymmetric technology shocks increase over time. A model with endogenous technology decisions reveals that two-third of the progression of asymmetric technology shocks is driven by greater exposition of traded industries to the international stock of knowledge. |
| Keywords: | Sector-biased technology shocks; Endogenous technological change; Factor-augmenting efficiency; Open economy; Labor reallocation; CES production function; Labor income share. |
| JEL: | E25 E62 F11 F41 O33 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2023-30&r=opm |
| By: | Philippe Andrade; Martin Arazi; Viacheslav Sheremirov |
| Abstract: | We study the aggregate effects of sectoral productivity shocks in a multisectoral New Keynesian open-economy model that allows for asymmetric input-output linkages, both within and between countries, as well as for heterogeneity in sectoral Calvo-type price stickiness. Asymmetries in the international production network play a key role in the model’s ability to produce large domestic effects of foreign sectoral supply shocks and large differential effects of domestic shocks and global shocks. Larger trade openness and substitutability between domestic inputs and foreign inputs can also significantly amplify the effects of foreign and global sectoral shocks on domestic aggregates. In comparison, sectoral heterogeneity in price stickiness does not materially amplify the domestic responses to productivity shocks that originate abroad. |
| Keywords: | international input-output linkages; sectoral shocks; Open-Economy New Keynesian Model |
| JEL: | E12 E31 F41 F44 |
| Date: | 2023–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:97203&r=opm |
| By: | Demirhan Demir; Selçuk Gül; Abdullah Kazdal |
| Abstract: | Advances in the integration to global value chains lead the use of imported inputs in production to increase. While the use of foreign intermediate products in domestic production may be linked with productivity gains over the medium-to-long term, the extent of the import dependency in production may also matter, especially from a trade-elasticity perspective. This study examines whether the import dependency of production in the manufacturing sectors in Türkiye plays a role in the relationship between real exchange rate movements and variations in export volume. Estimations regarding the short-run and long-run dynamics and the impulse response functions from the local projections provide evidence that the degree of import dependency does matter in terms of the responsiveness of export demand to the real exchange rate dynamics. Manufacturing sectors with relatively lower import dependency have higher real exchange rate elasticity of exports, which indicates that the firms in those sectors, on average, are more elastic in the price determination process with respect to the real exchange rate fluctuations. On the other hand, the results of the study show that the main determinant of Türkiye’s exports is the variations in external demand, and the effect of real exchange rate movements on export volume is relatively limited. |
| Keywords: | Import requirement, Real exchange rate elasticity, Local projections |
| JEL: | C23 F14 F31 L60 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:wpaper:2305&r=opm |
| By: | Pacheco, André Sanchez |
| Abstract: | I construct a novel data-set containing monthly inflation surprises for a set of developed and emerging economies. These data are used in a panel setting to analyze the relationship between inflation surprises and changes in short- and long-term interest rates as well as exchange rates on CPI release days. I find that a 1% upward surprise in monthly inflation is associated with (1) a +7.4bps daily change in the two-year benchmark interest rate; (2) a +5.1bps daily change in the ten-year rate and (3) an appreciation in the domestic exchange rate relative to the U.S. Dollar. Such sensitivities are heterogeneous across country groups. Interest rates in emerging economies are more sensitive to inflation surprises than those in developed markets. In contrast, exchange rates in emerging markets appear to be less sensitive to such surprises relative to developed counterparts. |
| Date: | 2023–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:eesptd:566&r=opm |
| By: | Victor Pontines (The South East Asian Central Banks (SEACEN) Research and Training Centre); Davaajargal Luvsannyam (The Bank of Mongolia) |
| Abstract: | This study investigates the role of fiscal policy in stabilising resource-rich economies vulnerable to external commodity shocks, with a specific focus on Mongolia. We analyse the effects of various external commodity shocks on Mongolia’s economy and find that fiscal policy’s responses to these shocks have been counter-cyclical. Additionally, we construct policy counterfactuals to examine the insulating role of fiscal policy on real domestic output. The findings reveal that counter-cyclical fiscal measures, particularly government expenditure, and to a lesser extent, government revenue, played an important role in Mongolia’s response to external commodity shocks. |
| Keywords: | external commodity shocks, fiscal policy, real output, Mongolia |
| JEL: | C51 E62 F41 Q43 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:sea:wpaper:wp51&r=opm |