Opting for structural or reduced form estimation is often hard to justify if one wants to both learn about the structure of the economy and obtain accurate predictions. In this paper, we show that using both structural and reduced form estimates simultaneously can lead to more accurate policy...

We study optimal monetary policy for a small open economy in a model where both inflation and output show persistence. We incorporate habit formation into intertemporal consumption decision and modify the Calvo price setting to include indexation to past inflation. The message conveyed from this...

The paper uses the QUEST III model to analyse the question of whether nontradable (service) sector reform would reduce external imbalances in monetary union, notably from the side of surplus countries. It considers an open economy with a positive net foreign asset (net creditor) position and...

We show that the preferences suggested by Greenwood, Hercowitz and Huffman (GHH), which are quite common in real business cycle (RBC) models of small open economies, are not suited for reproducing both the business cycle and the equity premium facts of a small open economy. We show that by...

We explore bifurcation phenomena in the open-economy New Keynesian CGG Model based on Clarida et al. (2001, 2002). We find that the open economy framework can bring about more complex dynamics, along with a wider variety of qualitative behaviors and policy responses. Introducing parameters...

This paper assesses the empirical desirability of the East Asian economies to form a monetary union. The Structural Vector Autoregression (VAR) method is employed to assess the nature of macroeconomic disturbances among the East Asian countries, as a preliminary guide in identifying potential...

This paper develops a dynamic general equilibrium model to assess the importance of the credit channel relative to the interest and exchange rate channels. It is motivated by increasing theoretical and empirical evidence that credit market conditions affect the propagation of cyclical...

This paper develops and estimates an open-economy dynamic stochastic general equilibrium (DSGE) model of the Hong Kong economy. The model features short-run price rigidities generated by monopolistic competition and staggered reoptimization. We devote special attention to asset prices and wealth...

The paper analyses the impact of structural reforms on external positions in monetary union in a 3-region version of QUEST III. Wage cost moderation and fiscal consolidation improve the current account balance in the medium term, but positive income effects tend to offset the initial increase in...

We analyze a relation between interest rate controls and equilibrium determinacy using a two-country model featuring traded and non-traded goods. In addition, parameters of preference and production may differ between the two countries. We find that macroeconomic stability strongly depends on...