Open Economy Macroeconomics 1st edition by Martin Uribe , Stephanie Schmitt–grohé – Ebook PDF Instant Download/Delivery: 0691158770 978-0691158778
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ISBN 10: 0691158770
ISBN 13: 978-0691158778
Author: Martin Uribe , Stephanie Schmitt–grohé
A cutting-edge graduate-level textbook on the macroeconomics of international trade Combining theoretical models and data in ways unimaginable just a few years ago, open economy macroeconomics has experienced enormous growth over the past several decades. This rigorous and self-contained textbook brings graduate students, scholars, and policymakers to the research frontier and provides the tools and context necessary for new research and policy proposals. Martin Uribe and Stephanie Schmitt-Grohe factor in the discipline’s latest developments, including major theoretical advances in incorporating financial and nominal frictions into microfounded dynamic models of the open economy, the availability of macro- and microdata for emerging and developed countries, and a revolution in the tools available to simulate and estimate dynamic stochastic models. The authors begin with a canonical general equilibrium model of an open economy and then build levels of complexity through the coverage of important topics such as international business-cycle analysis, financial frictions as drivers and transmitters of business cycles and global crises, sovereign default, pecuniary externalities, involuntary unemployment, optimal macroprudential policy, and the role of nominal rigidities in shaping optimal exchange-rate policy. Based on courses taught at several universities, Open Economy Macroeconomics is an essential resource for students, researchers, and practitioners. * Detailed exploration of international business-cycle analysis* Coverage of financial frictions as drivers and transmitters of business cycles and global crises* Extensive investigation of nominal rigidities and their role in shaping optimal exchange-rate policy* Other topics include fixed exchange-rate regimes, involuntary unemployment, optimal macroprudential policy, and sovereign default and debt sustainability* Chapters include exercises and replication codes
Open Economy Macroeconomics 1st Table of contents:
1 Business-Cycle Facts Around the World
1.1 Measuring Business Cycles
1.2 Business-Cycle Facts Around the World
1.3 Business Cycles in Poor, Emerging, and Rich Countries
1.4 Country Size and Observed Business Cycles
1.5 Hodrick-Prescott (HP) Filtering
1.6 Growth Rates
1.7 Business-Cycle Facts with Quarterly Data
1.8 Duration and Amplitude of Business Cycles in Emerging and Developed Countries
1.9 Appendix
1.9.1 Countries with at Least 30 Years of Annual Data
1.9.2 Derivation of the HP Filter
1.9.3 Country-by-Country Business-Cycle Statistics at Annual and Quarterly Frequency
1.10 Exercises
2 An Open Endowment Economy
2.1 The Model Economy
2.2 Stationary Income Shocks
2.3 Stationary Income Shocks: AR(2) Processes
2.4 Nonstationary Income Shocks
2.5 Testing the Intertemporal Approach to the Current Account
2.6 Exercises
3 An Open Economy with Capital
3.1 The Basic Framework
3.2 A Steady-State Equilibrium
3.3 Adjustment to a Permanent Productivity Shock
3.4 Adjustment to Temporary Productivity Shocks
3.5 Capital Adjustment Costs
3.5.1 Dynamics of the Capital Stock
3.5.2 A Permanent Technology Shock
3.6 Exercises
4 The Open Economy Real-Business-Cycle Model
4.1 The Model
4.1.1 Inducing Stationarity: External Debt-Elastic Interest Rate (EDEIR)
4.1.2 Equilibrium
4.2 Decentralization
4.2.1 Households in the Decentralized Economy
4.2.2 Firms Producing Final Goods
4.2.3 Firms Producing Capital Goods
4.2.4 The Decentralized Equilibrium
4.3 Functional Forms
4.4 Deterministic Steady State
4.5 Calibration
4.6 Approximating Equilibrium Dynamics
4.7 The Performance of the Model
4.8 The Role of Persistence and Capital Adjustment Costs
4.9 The Complete Asset Markets (CAM) Model
4.9.1 What Is the Current AccountWhen Markets Are Complete?
4.9.2 Quantitative Predictions of the CAM Model
4.10 Alternative Ways to Induce Stationarity
4.10.1 The Internal Debt-Elastic Interest Rate (IDEIR) Model
4.10.2 The Portfolio Adjustment Cost (PAC) Model
4.10.3 The External Discount Factor (EDF) Model
4.10.4 The Internal Discount Factor (IDF) Model
4.10.5 The Model with No Stationarity-Inducing Features (NSIF)
4.11 The Perpetual-Youth (PY) Model
4.11.1 Basic Intuition
4.11.2 Perpetually Young Households
4.11.3 Firms Producing Consumption Goods
4.11.4 Firms Producing Capital Goods
4.11.5 Equilibrium
4.12 Inducing Stationarity: Quantitative Comparison of AlternativeMethods
4.13 Global Solution
4.14 Appendix
4.14.1 First-Order Accurate Approximations to Dynamic General Equilibrium Models
4.14.2 Local Existence and Uniqueness of Equilibrium
4.14.3 Computing Second Moments
4.14.4 Computing Impulse Response Functions
4.14.5 Matlab Code for Linear Perturbation Methods
4.15 Exercises
5 Business Cycles in Emerging Countries: Productivity Shocks versus Financial Frictions
5.1 Can the Open Economy RBC Model Generate Excess Consumption Volatility?
5.2 An Open Economy RBC Model with Stationary and Nonstationary Technology Shocks
5.3 Letting Technology Shocks Compete with Other Shocks and Frictions
5.3.1 Households
5.3.2 Firms withWorking-Capital Constraints
5.3.3 Interest-Rate Shocks
5.3.4 Equilibrium
5.4 Bayesian Estimation on a Century of Data
5.5 How Important Are Trend Shocks?
5.6 The Role of Financial Frictions
5.7 Imperfect Information and Noise Shocks
5.7.1 Using the Kalman Filter to Compute Future Expected TFP Growth
5.7.2 Computation and Estimation
5.7.3 Incomplete Information Versus Noisy Information
5.7.4 Estimation and Model Fit
5.7.5 The Importance of Noise Shocks
5.7.6 How Important Are Nonstationary Productivity Shocks?
5.8 Exercises
6 Interest-Rate Shocks
6.1 An Empirical Model
6.2 Impulse Response Functions
6.3 Variance Decompositions
6.4 An Open Economy Subject to Interest-Rate Shocks
6.4.1 Firms andWorking-Capital Constraints
6.4.2 Capital Accumulation and Gestation Lags
6.4.3 Households and Habit Formation
6.4.4 Driving Forces
6.4.5 Equilibrium
6.4.6 Estimation by Limited Information Methods
6.5 Theoretical and Estimated Impulse Responses
6.6 Theoretical and Estimated Conditional Volatilities
6.7 Global Risk Factors and Business Cycles in Emerging Economies
6.8 Exercises
7 Importable Goods, Exportable Goods, and the Terms of Trade
7.1 A Simple Empirical Model of the Terms of Trade
7.2 The Terms of Trade and the Trade Balance: Empirics
7.3 Terms of Trade and the Trade Balance: Simple Explanations, Old and New
7.3.1 The Harberger-Laursen-Metzler Effect
7.3.2 The Obstfeld-Razin-Svensson Effect
7.3.3 Testing for the ORS Effect
7.3.4 The ORS Effect in the SOE-RBC Model
7.4 How Important Are Terms-of-Trade Shocks?
7.5 The MX Model
7.5.1 Households
7.5.2 Production of Final Goods
7.5.3 Production of Importable and Exportable Goods
7.5.4 Equilibrium
7.5.5 Observables
7.6 Parameterization of the MX Model
7.6.1 Preferences and Technologies in the MX Model
7.6.2 Calibration of the Elasticity of Substitution between Importables and Exportables, µ
7.6.3 Calibration of the Share Parameter, .
7.6.4 Calibration of the Share of Exports of Value-Added in GDP, sx
7.6.5 Calibration of the Share of Exportable Output in GDP, syx
7.6.6 Estimation of the Capital Adjustment Cost Parameters, φm and φx, and the Debt Elasticity of
7.7 Response of the MX Model to Terms-of-Trade Shocks
7.8 Terms-of-Trade Shocks: Less Important in Data Than in Theory
7.8.1 Sensitivity Analysis
7.9 Exercises
8 Nontradable Goods and the Real Exchange Rate
8.1 The Real Exchange Rate
8.2 The TNT Model
8.2.1 The Real Exchange Rate and the Relative Price of Nontradables
8.2.2 The Equilibrium Real Exchange Rate
8.2.3 Adjustment of the Real Exchange Rate to Terms-of-Trade Shocks
8.2.4 Adjustment of the Real Exchange Rate to Interest-Rate Shocks
8.2.5 Adjustment of Output to Terms-of-Trade Shocks in the TNT Model
8.3 Empirical Evidence on the Effects of Terms-of-Trade Shocks on the Real Exchange Rate and Aggrega
8.4 The MXN Model
8.4.1 Households
8.4.2 Firms Producing Final Goods
8.4.3 Firms Producing the Tradable Composite Good
8.4.4 Firms Producing Importable, Exportable, and Nontradable Goods
8.4.5 Market Clearing
8.4.6 Competitive Equilibrium
8.4.7 Observables
8.4.8 Functional Forms
8.4.9 Calibration of the MXN Model
8.5 Response of the Real Exchange Rate and Real Activity to Terms-of-Trade Shocks in the MXN Model
8.6 The Terms-of-Trade Disconnect
8.7 Exercises
9 Nominal Rigidity, Exchange Rates, and Unemployment
9.1 An Open Economy with Downward Nominal Wage Rigidity
9.1.1 Households
9.1.2 Firms
9.1.3 Downward NominalWage Rigidity and the Labor Market
9.1.4 Equilibrium
9.2 Currency Pegs
9.2.1 A Peg-Induced Externality
9.2.2 Volatility and Average Unemployment
9.2.3 Adjustment to a Temporary Fall in the Interest Rate
9.3 Optimal Exchange-Rate Policy
9.3.1 The Full-Employment Exchange-Rate Policy
9.3.2 Pareto Optimality of the Full-Employment Exchange-Rate Policy
9.3.3 When Is It Inevitable to Devalue?
9.4 Empirical Evidence on Downward Nominal Wage Rigidity
9.4.1 Evidence from Micro Data
9.4.2 Evidence from Informal Labor Markets
9.4.3 Evidence from the Great Depression
9.4.4 Evidence from Emerging Countries and Inference on γ
9.5 The Case of Equal Intra- and Intertemporal Elasticities of Substitution
9.6 Approximating Equilibrium Dynamics
9.7 Parameterization of the Model
9.7.1 Estimation of the Exogenous Driving Process
9.7.2 Calibration of Preferences, Technologies, and Nominal Rigidities
9.8 External Crises and Exchange-Rate Policy: A Quantitative Analysis
9.8.1 Definition of an External Crisis
9.8.2 Crisis Dynamics under a Currency Peg
9.8.3 Crisis Dynamics under Optimal Exchange-Rate Policy
9.8.4 Devaluations, Revaluations, and Inflation in Reality
9.9 Empirical Evidence on the Expansionary Effects of Devaluations
9.9.1 Exiting a Currency Peg: Argentina Post Convertibility
9.9.2 Exiting the Gold Standard: Europe 1929–1935
9.10 The Welfare Costs of Currency Pegs
9.11 Symmetric Wage Rigidity
9.12 The Mussa Puzzle
9.13 Endogenous Labor Supply
9.14 Production in the Traded Sector
9.15 Product Price Rigidity
9.15.1 Downward Price Rigidity
9.15.2 Symmetric Price Rigidity
9.16 Staggered Price Setting: The Calvo Model
9.16.1 Households
9.16.2 Firms Producing Final Nontraded Goods
9.16.3 Firms Producing Nontraded Intermediate Goods
9.16.4 Aggregation and Equilibrium
9.16.5 The Flexible-Price Equilibrium
9.16.6 Optimal Exchange-Rate Policy
9.16.7 The Open Economy New-Keynesian Phillips Curve
9.16.8 Crisis Dynamics in the Calvo Model
9.16.9 Welfare Costs of Currency Pegs in the Calvo Model
9.17 Exercises
10 Exchange-Rate Policy and Capital Controls
10.1 First-Best Fiscal Policy under Fixed Exchange Rates
10.1.1 Labor Subsidies
10.1.2 Equivalence of Labor Subsidies and Devaluations
10.1.3 Sales Subsidies
10.1.4 Consumption Subsidies
10.2 Capital Controls
10.2.1 Capital Controls as a Distortion of the Interest Rate
10.2.2 Equilibrium under Capital Controls and a Currency Peg
10.3 Optimal Capital Controls under Fixed Exchange Rates
10.4 The Optimality of Prudential Capital Control Policy
10.5 Optimal Capital Controls during a Boom-Bust Episode
10.6 Level and Volatility Effects of Optimal Capital Controls under a Currency Peg
10.7 Overborrowing under Fixed Exchange Rates
10.8 The Welfare Cost of Free Capital Mobility in Fixed Exchange-Rate Economies
10.9 Are Observed Capital Controls Prudential?
10.10 Appendix: Equilibrium for t = 1 in Section 10.4
10.11 Exercises
11 Policy Credibility and Balance-of-Payments Crises
11.1 The Model
11.1.1 Households
11.1.2 The Government
11.1.3 Equilibrium
11.2 A Credible Tax Reform
11.3 A Noncredible Tax Reform
11.3.1 Lack of Credibility and Overborrowing
11.3.2 Equivalence of Imperfect Credibility and Temporariness
11.4 Lack of Credibility and Exchange-Rate Policy
11.4.1 A Cash-in-Advance Economy
11.4.2 A Noncredible Exchange-Rate-Based Inflation-Stabilization Program
11.5 Balance-of-Payments Crises
11.6 Discussion and Extensions
11.7 Appendix: The Hamiltonian
11.8 Exercises
12 Financial Frictions and Aggregate Instability
12.1 Stock Collateral Constraints
12.1.1 The Steady-State Equilibrium
12.1.2 Frictionless Adjustment to Regular Shocks
12.1.3 Adjustment to Large Shocks: Fisherian Debt Deflations and Deleveraging
12.2 Stock Collateral Constraints and Self-Fulfilling Financial Crises
12.3 Flow Collateral Constraints
12.4 Flow Collateral Constraints and Self-Fulfilling Financial Crises
12.5 Debt Dynamics in a Stochastic Economy with a Flow Collateral Constraint
12.5.1 Calibration
12.5.2 Equilibrium Selection
12.5.3 Computation of Equilibrium
12.5.4 Equilibrium Debt Distributions
12.5.5 The Unconstrained Economy
12.6 Financial Amplification
12.7 Optimal Capital Control Policy
12.7.1 Overborrowing or Underborrowing? An Analytical Example
12.7.2 Implementation
12.8 Overborrowing and Underborrowing: A Quantitative Analysis
12.9 Is Optimal Capital Control Policy Macroprudential?
12.10 Optimal Consumption Taxes
12.11 Aggregate Versus Individual Collateral Constraints
12.12 Exercises
13 Sovereign Default
13.1 Empirical Regularities
13.1.1 Frequency and Length of Defaults
13.1.2 Haircuts
13.1.3 Debt and Default
13.1.4 Country Premia
13.1.5 Country Spreads and Default Probabilities: A Sample Mismatch Problem
13.1.6 Do Countries Default in Bad Times?
13.2 The Cost of Default: Empirical Evidence
13.2.1 Exclusion from Financial Markets
13.2.2 Output Losses
13.2.3 International Trade Sanctions
13.3 Default Incentives with State-Contingent Contracts
13.3.1 The Optimal Debt Contract with Commitment
13.3.2 The Optimal Debt Contract without Commitment
13.3.3 Direct Sanctions
13.3.4 Reputation
13.4 Default Incentives with Non-State-Contingent Contracts
13.4.1 The Eaton-Gersovitz Model
13.4.2 The Default Set
13.4.3 Default Risk and the Country Premium
13.5 Saving and the Breakdown of Reputational Lending
13.6 Quantitative Analysis of the Eaton-Gersovitz Model
13.6.1 Serial Correlation of the Endowment Process
13.6.2 Finite Exclusion Period
13.6.3 Output Cost of Default
13.6.4 The Model
13.6.5 Calibration and Functional Forms
13.6.6 Computation
13.6.7 Quantitative Predictions of the Eaton-Gersovitz Model
13.6.8 Dynamics Around a Typical Default Episode
13.6.9 Goodness of Approximation of the Eaton-Gersovitz Model
13.6.10 Alternative Output Cost Specification
13.6.11 The Quantitative Importance of Output Costs of Default
13.6.12 The Quantitative Irrelevance of Exclusion
13.6.13 The Role of Discounting
13.6.14 Changing the Volatility of the Endowment Process
13.6.15 Time-Varying Volatility, Country Spreads, and Default
13.6.16 Varying the Persistence of the Output Process
13.7 The Welfare Cost of Lack of Commitment
13.8 Decentralization of the Eaton-Gersovitz Model
13.8.1 Households
13.8.2 The Government
13.8.3 Competitive Equilibrium
13.8.4 Equilibrium under Optimal Capital Control Policy
13.8.5 The Optimal-Policy Equilibrium as a Decentralization of the Eaton-Gersovitz Model
13.8.6 Capital Control Dynamics
13.8.7 Optimal Default Policy without Capital Controls
13.9 Risk-Averse Lenders
13.10 Long-Term Debt and Default
13.10.1 A Random-Maturity Model
13.10.2 A Perpetuity Model
13.10.3 The Perpetuity Model as a Special Case of the Random-Maturity Model
13.10.4 Endogenous Choice of Maturity
13.11 Debt Renegotiation
13.11.1 The Eaton-Gersovitz Model with Debt Renegotiation
13.11.2 Quantitative Predictions of the Debt-Renegotiation Model
13.12 Default and Monetary Policy
13.12.1 The Twin Ds
13.12.2 A Model of the Twin Ds
13.12.3 Optimality of the Full-Employment Devaluation Policy
13.12.4 Default Dynamics under Optimal Devaluation Policy and Currency Pegs
13.13 Appendix: Sovereign Default Dates, 1975–2014
13.14 Exercises
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Martin Uribe,Stephanie Schmitt grohé,Open Economy
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