English, Article, Journal or magazine article edition: Money and the Open Economy Business Cycle: A Flexible Price Model Robert P. Flood; Robert J. Hodrick

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Bookmark: http://trove.nla.gov.au/version/140238
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Money and the Open Economy Business Cycle: A Flexible Price Model
Author
  • Robert P. Flood
  • Robert J. Hodrick
Physical Description
  • preprint
Notes
  • This paper develops an open-economy model of the business cycle. The nominal prices in the model are flexible and monetary nonneutrality is developed using information confusion about the sources of disturbances to demand coupled with differential persistence of demand shocks. Firms use inventories to smooth their production, and consumers follow a stochastic permanent income expenditure function. The major implication of the model is that unperceived monetary disturbances improve the terms of trade and increase real output in contrast to sticky price models in which the terms of trade deteriorates. This implication of the model is examined empirically.
  • RePEc:nbr:nberwo:1967
Language
  • English
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