Over the past 15 years there has been remarkable progress in the specification and estimation of dynamic stochastic general equilibrium (DSGE) models. Central banks in developed and emerging market economies have become increasingly interested in their usefulness for policy analysis and...

The remarkable stability of low domestic inflation in many countries requires explanation. In this paper, a number of competing hypotheses are evaluated on a stand-alone basis, and all are found to be inadequate. This includes the view that this outcome has been solely the result of more...

In this paper, we explore empirically the role of openness, technology and labour marketrigidity in the determination of the effect of the exchange rate on employment in Portugal. Wedevelop an index that allows us to measure labour market flexibility at the sector level. Thisindex shows that...

There is increasing evidence that the interaction between shocks and labour marketinstitutions is crucial to understanding the dynamics of employment. In this paper, we showthat the inclusion of labour adjustment costs in a trade model affects the impact of exchangerate movements on employment....

In this paper we study the effect of NAFTA on the responsiveness of Mexican economy toreal exchange rate shocks. We argue that, by opening the U.S. and Canadian markets toMexican goods, NAFTA made it easier for domestic producers to take advantage of theopportunities brought by the depreciation...

Real exchange rate movements are important drivers of the reallocation of resourcesbetween sectors of the economy. Economic theory suggests that the impact of exchangerates should vary with the degree of exposure to international competition and with thetechnology level. This paper contributes...

This paper studies a two country model with economies disaggregated into traded and non-traded sectors and in which investment goods as in practice are produced by combining inputsfrom all sectors. The model also accounts for nontraded distribution services employed in retail-ing traded goods to...

The consensus about the ability of the standard open-economy neoclassical growthmodel to account for interest-rate driven business cycles has changed over time:whereas early research concluded that business cycles are neutral to interest-rateshocks, more recent investigations suggest that these...

By simplifying the computational tasks and by providing step-by-step explana-tions of the procedures required to study a linear dynamic rational expectations(LDRE) model, this paper and the accompanying \LDRE Toolbox" of Matalb func-tions guide a researcher with almost no experience in...

Paradoxically, high-investment and high-growth developing countries tend toexperience capital outows. This paper shows that this allocation puzzle can beexplained simply by introducing uninsurable idiosyncratic investment risk in theneoclassical growth model. Using a sample of 67 countries...