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Canada's Pioneering Experience with a Flexible Exchange Rate in the 1950s : (Hard) Lessons Learned for Monetary Policy in a Small Open Economy

Bordo, Michael D. - 2010

This paper revisits Canada's pioneering experience with floating exchange rate over the period 1950-1962. It examines … whether the floating rate was the best option for Canada in the 1950s by developing and estimating a New Keynesian small open … that monetary policy was more volatile in the post-1957 period and Canada's macroeconomic performance suffered as a result …

Persistent link: https://www.econbiz.de/10012759691

Defaultable Debt, Interest Rates and the Current Account

Aguiar, Mark; Gopinath, Gita - 2021

World capital markets have experienced large scale sovereign defaults on a number of occasions, the most recent being Argentina's default in 2002. In this paper we develop a quantitative model of debt and default in a small open economy. We use this model to match four empirical regularities...

Persistent link: https://www.econbiz.de/10013244407

Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy

Sen, Partha; Turnovsky, Stephen J. - 2021

This paper analyze these effects of a tariff in an intertemporal optimizing model, emphasizing the role of capital accumulation. Three types of increases in the tariff rate are considered: (i) unanticipated permanent; (ii) unanticipated temporary; (iii) anticipated permanent. There are two main...

Persistent link: https://www.econbiz.de/10013248261

A Small Open Economy in Depression : Lessons from Canada in the 1930s

Betts, Caroline M.; Bordo, Michael D.; Redish, Angela - 2021

open economy model for Canada that decomposes output fluctuations into sources identifiable with world and country …-specific disturbances. We find that the onset, depth and duration of output collapse in both Canada and the U.S. are primarily attributable …

Persistent link: https://www.econbiz.de/10013229833

Saving, Investment, and Gold : A Reassessment of Historical Current Account Data

Jones, Matthew T.; Obstfeld, Maurice - 2021

This paper revises pre-World War II current account data for thirteen countries by treating gold flows on a consistent basis. The standard historical data sources often fail to distinguish between monetary gold exports, which are capital-account credits, and nonmonetary gold exports, which are...

Persistent link: https://www.econbiz.de/10013243431

Financial Development and the Instability of Open Economies

Aghion, Philippe; Banerjee, Abhijit V.; Bacchetta, Philippe - 2021

This paper introduces a framework for analyzing the role of financial factors as a source of instability in small open economies. Our basic model is a dynamic open economy model with a tradeable good produced with capital and a country-specific factor. We also assume that firms face credit...

Persistent link: https://www.econbiz.de/10013221113

Monetary Policy in the Open Economy Revisited : Price Setting and Exchange Rate Flexibility

Devereux, Michael B.; Engel, Charles - 2021

This paper develops a welfare-based model of monetary policy in an open economy. We focus on the extent to which monetary policy should be employed in maintaining the exchange rate. The traditional approach maintains that exchange rate flexibility is desirable in the presence of real...

Persistent link: https://www.econbiz.de/10013223870

Contingent Protection as Better Insurance

Prusa, Thomas J.; Fischer, Ronald - 2021

We formalize the notion that GATT exceptions such as antidumping and escape clause actions can act as insurance for import competing sectors affected by adverse price shocks. We use a general equilibrium model with several import competing sectors and assume incomplete markets so that agents...

Persistent link: https://www.econbiz.de/10013223874

Sudden Stops and Output Drops

Chari, Varadarajan V.; Kehoe, Patrick J.; McGrattan, … - 2021

In recent financial crises and in recent theoretical studies of them, abrupt declines in capital inflows, or sudden stops, have been linked with large drops in output. Do sudden stops cause output drops? No, according to a standard equilibrium model in which sudden stops are generated by an...

Persistent link: https://www.econbiz.de/10013225175

Green Tax Reform and Competitiveness

Koskela, Erkki; Schöb, Ronnie; Sinn, Hans-Werner - 2021

This paper develops a model of a small open economy that produces an export good with domestic labour and imported energy and is stuck in an unemployment situation resulting from an excessive fixed net-of-tax wage rate. We study a revenue-neutral green tax reform that substitutes energy for wage...

Persistent link: https://www.econbiz.de/10013225566