This paper assesses the applicability of new Keynesian DSGE models to low income economies similar to those in Sub Saharan Africa. To this effect, we first review the development, criticisms and recent advances in DSGE modeling. Then we assess the implications that emanate from the assumptions...

How do key macroeconomic variables of a small open economy with segmented labour markets behave in response to domestic and external shocks? In this paper we attempt to address this question by modeling the coexistence of a formal labour market with higher wage rates and search frictions, and an...

Firms in most low-income countries depend almost entirely on imported capital and intermediate inputs. As a result, the availability and cost of foreign exchange play a crucial role on the macroeconomic performance of these countries. In this study we introduce foreign exchange constraints that...

Firms in many low income countries depend entirely on imported capital and intermediate inputs. As a result, in these countries economic activity is considerably influenced by the capacity of the economy to import these inputs which, in turn, depends on the availability and cost of foreign...