Chia, Wai-Mun, Cheng, Tianyin and Li, Mengling (2012) Exogenous shocks and exchange rate regimes. The world economy, 35 (4). pp. 444-460. ISSN 0378-5920
Abstract
Using a dynamic stochastic general equilibrium (DSGE) model with nominal price rigidity and imperfect competition, we examine the impact of terms-of-trade and foreign interest rate shocks on some key macroeconomic variables for a small open economy under different exchange rate regimes. Numerical solutions from the model are found consistent with empirical panel VAR results of 33 Asian economies for the period of 1980-2009. From both the theoretical model and empirical evidence, we find that (i) output responses to terms-of-trade and foreign interest rate shocks are smoother in floats, (ii) price responses to terms-of-trade shocks are smoother in floats than in pegs, while its responses to foreign interest shocks are more volatile in floats than in pegs, and (iii) the effects of terms-of-trade and foreign interest shocks are more prolonged under floats
| Item Type: | Article |
|---|---|
| Official URL: | http://eu.wiley.com/WileyCDA/WileyTitle/productCd-... |
| Additional Information: | © 2012 Blackwell |
| Library of Congress subject classification: | H Social Sciences > HG Finance |
| Sets: | Departments > Economics |
| Rights: | http://www.lse.ac.uk/library/rights/LSERO.htm |
| URL: | http://eprints.lse.ac.uk/43338/ |
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