Productivity and Preferences in a Small Open Economy
Chadha, Jagjit S.
Cambridge Working Papers in Economics
Faculty of Economics
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Chadha, J. S., Janssen, N., & Nolan, C. (2004). Productivity and Preferences in a Small Open Economy. https://doi.org/10.17863/CAM.5021
Following Hall (1997) it is increasingly common to incorporate preference, as well as productivity, perturbations in calibrated general equilibrium models. We assess the performance of a small open economy stochastic growth model (based on the Blanchard-Yaari framework) under alternate driving processes. Whist both models provide familiar descriptions of the aggregate economy, we find that the model driven by productivity disturbances has clear advantages in explaining the behaviour towards foreign asset accumulation.
Classification-JEL: E20, E32, F32, F41, intertemporal macro, open economy, current account dynamics
This record's DOI: https://doi.org/10.17863/CAM.5021
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