Propagation of nominal shocks in open economies

Working paper no 5, 2002

Authors Andersen, Torben M.; Beier, Niels C.
Subject Monetary- and foreign-exchange policy; Monetary conditions; Monetary policy; Monetary-policy transmission
Type Working paper
Year 2002
Published 6 September 2002
Empirical evidence documents substantial persistence in the adjustment process to nominal shocks. Existing open-economy models have failed either to generate interesting dynamics or found that the mechanisms are quantitatively weak. We consider the propagation of nominal shocks in a fully specified stochastic intertemporal open-economy model with incomplete capital markets and staggered nominal wage contracts.