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This paper investigates how oil price shocks affect the trade balance and terms of trade in a two country DSGE model. We show that the response of the external sector depends critically on the structure of financial market risk-sharing. Under incomplete markets, higher oil prices reduce the...
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thought not, and theory offers ambiguous messages. A hard exchange-rate regime such as the gold standard might limit monetary … shocks if it ties the hands of policy makers. But any decision to forsake exchange-rate flexibility might compromise shock … absorption in a world of real shocks and nominal stickiness. A simple model shows how a lack of flexibility can be discerned in …
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thought not, and theory offers ambiguous messages. A hard exchange-rate regime such as the gold standard might limit monetary … shocks if it ties the hands of policy makers. But any decision to forsake exchange-rate flexibility might compromise shock … absorption in a world of real shocks and nominal stickiness. A simple model shows how a lack of flexibility can be discerned in …
Persistent link: https://www.econbiz.de/10012466876
Beginning in 2009, in many advanced economies, policy rates reached their zero lower bound (ZLB). Almost at the same time, oil prices started rising again. We analyze how the ZLB affects the propagation of oil shocks. As these shocks move inflation and output in opposite directions, their...
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