Working Paper presents research work by both Danmarks Nationalbank’s employees and our partners. The series is primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.
Propagation of nominal shocks in open economies
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.