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Čipkutė, Eivilė. "Use of Securitisation in Small Open Economy." Doctoral thesis, Lithuanian Academic Libraries Network (LABT), 2013. http://vddb.laba.lt/obj/LT-eLABa-0001:E.02~2013~D_20130327_100433-50030.
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The research problem of this dissertation is the use of securitization in a small open economy. During the process of securitization bank’s illiquid assets are replaced by liquid assets – asset-backed securities, what allows increasing and diversifying bank’s financial resources. Having in mind the relevance of the economic situation in Lithuania, the utility of securitisation for Lithuania is analyzed in this dissertation. Dissertation also analyses positive and negative aspects of the experience of other countries in using securitization. Research showed that there is a strong correlation between GDP and credit resources in Lithuania. This fact means that country's economic growth could be promoted by finding ways to supplement the financial resources available to the banks and by encouraging them to lend out these resources. Thus, the use of the funds received after issuing asset-backed securities for further lending by banks would have a direct positive impact on the level of GDP in Lithuania. In order to successfully develop asset securitization in the country Lithuanian banks should concentrate their resources and expertise. This would help to achieve the necessary economies of scale and acceptable transaction costs. Analysis showed that Lithuanian legal framework for securitization should be also improved considering best practices from other countries in order to create greater legal certainty, reduce the administrative burden and ensure investor protection.Disertacijoje nagrinėjama mokslinė problema yra sekiuritizacijos panaudojimas mažoje atviroje ekonomikoje. Sekiuritizacijos metu nelikvidus turtas yra pakeičiamas likvidžiu turtu – turtu padengtais vertybiniais popieriais, kuris leidžia padidinti ir diversifikuoti bankų turimus kreditinius išteklius. Atsižvelgus į darbo aktualumą Lietuvos ekonominei situacijai, darbe vertinamas sekiuritizacijos panaudojimo Lietuvoje naudingumas, analizuojami sekiuritizacijos teigiami ir neigiami aspektai, kitų šalių patirtis ir praktika. Atliktas tyrimas parodė, kad Lietuvoje egzistuoja stiprus ryšys tarp BVP ir kreditinių išteklių, kas reiškia, kad suradus būdų kaip papildyti bankų turimus finansinius išteklius ir taip paskatinus juos skolinti, atitinkamai paspartėtų šalies ekonomikos atsigavimas bei tolesnis augimas. Tad bankams pritaikius sekiuritizaciją ir išleidus turtu padengtus vertybinius popierius, o gautas lėšas panaudojus tolesniam kreditavimui, tai turėtų tiesioginės teigiamos įtakos BVP dydžiui Lietuvoje. Siekiant sėkmingai vystyti sekiuritizaciją Lietuvoje bankams vertėtų kooperuotis sutelkiant savo išteklius bei kompetenciją, kas leistų pasiekti reikiamą masto ekonomiją ir priimtinus sekiuritizacijos sandorių kaštus. Taip pat reikėtų tobulinti Lietuvos teisinę bazę sekiuritizacijos srityje pasiremiant geriausia sekiuritizacijos reguliavimo praktika: kurti didesnį teisinį tikrumą, mažinti administracinę naštą ir užtikrinti investuotojų apsaugą.
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Hawkins, Penelope Anne. "Financial constraints and the small open economy." Thesis, University of Stirling, 2000. http://hdl.handle.net/1893/21628.
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The thesis develops a new model of the small open economy emphasizing financial constraints, based on the notion of liquidity preference as a constraining tendency on the income adjustment process. Preference for liquid assets results in a number of financial states of constraint, such as financial vulnerability, financial exclusion and financial fragility. These are explored in a regional and international context. Openness brings with it new opportunity as well as potential constraints. Models of small open economies have in general assumed away the latter and have neglected the consequences of financial openness. This is reflected in the absence of a means to identify economies as small and open on the basis of their financial exposure. The financial vulnerability index is developed to address this deficit. Applied to twenty-one countries, the index reveals that emerging countries can be classified as small open economies constrained by preference for liquid assets. Policies designed with the conventional approach to constraints in mind appear to be inappropriate for these countries. The concept of constraints has rarely been dealt with explicitly and a possible categorisation of constraints for mainstream and Post Keynesian schools is developed. It proves to be a useful point of entry for grasping ontological differences between schools. It also provides insights into the constraining tendencies facing the small open economy, and how they can be managed. When these insights are applied to the South African economy, the current macroeconomic policy, and critiques thereof, are found to be wanting.
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Athanasoglou, Panayotis P. "A disequilibrium model for a small open economy." Thesis, University of Sussex, 1988. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.260029.
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This study is mainly concerned with the developmen~ of a disequilibrium model for a small open economy and its application to the Greek manufacturing sector over the period 1962- 1982 using quarterly data. The economy defined comprises two sets of agents: firms and households, operating in two markets: goods and labour. Firms, which are profit maximizers, produce a non-storable good and demand labour while consumers, which are utility maximizers, demand goods and supply labour. Prices (and wages) are considered fixed in the short run and agents perceive quantity constraints. Taking into account the spill-over effects from the one market to the other, one can determine the appropriate effective demand functions for employment and imports. In the present case, the economy will alternatively belong to three different unemployment regimes; namely the classical, the keynesian and the repressed inflation. Actual output and exports which are endogenous in this model, are given by the production function and the foreign demand for the domestic product, respectively. However, actual employment is determined by the minimum of notional (Walrasian) demand for labour, effective demand for labour and the supply of labour, while actual imports are conditional to the regime ciassification obtained in the labour market. The equations of the model appropriately extended to reflect the dynamics and the specific characteristics of the Greek manufacturing sector were estimated by both least squares and maximum likelihood methods. Specifically, the former was applied to t~e production, imports and ex?orts functions, whil~ the'latter to the employment function. The construc-· tion of several time-series and the use of quarterly data for a period of 23 years made it possible to exploit the shortrun properties of the model. . It is found that this approach produces theoretically acceptable and plausible results.
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Ahlén, Jonathan. "Policy Uncertainty Shocks in a Small Open Economy." Thesis, Örebro universitet, Handelshögskolan vid Örebro Universitet, 2019. http://urn.kb.se/resolve?urn=urn:nbn:se:oru:diva-77176.
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Pozo, Sánchez Jorge. "Bank risk-taking, small open economy and macroprudential policy." Doctoral thesis, Universitat Pompeu Fabra, 2019. http://hdl.handle.net/10803/668370.
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This dissertation consists of three essays. In the first chapter, I develop a two-period small
open economy with banks. The interaction of the limited liability faced by banks and the bank
deposit insurance results in an excessive bank risk-taking. The model suggests that a foreign
interest rate cut or a higher access to international credit markets reduces banks’ default probability
and hence banks’ incentives to take excessive risk. In the second chapter, I extend the
two-period model to an infinite-period model, which creates an intertemporal channel that in
turn amplifies the short-term effects of an unanticipated sudden stop on excess bank risk-taking.
The model predicts the substantial short-term rise in the morosity rate after the sudden stop that
hit Peru in 1998. In the third chapter, I extend the chapter 1’s model to study the role of the real
exchange rate on bank risk-taking decisions after a foreign interest rate cut. I find that the general
equilibrium effects on real exchange rates diminish the negative effect on excessive bank
risk-taking of a foreign interest rate cut discussed in chapter 1.Esta tesis consta de tres ensayos. En el primer capítulo, presento un modelo de una economía pequeña y abierta de dos periodos con bancos. La interacción de la responsabilidad limitada de los bancos con el seguro de depósito resulta en una toma excesiva de riesgo por parte de los bancos. El modelo sugiere que un recorte en la tasa de interés extranjera o un mayor acceso a los mercados crediticios internacionales reduce la probabilidad de incumplimiento de los bancos y por tanto sus incentivos para asumir un riesgo excesivo. En el segundo capítulo, extiendo el modelo de dos periodos a un modelo con horizonte temporal infinito, que crea un canal intertemporal que a su vez amplifica los efectos de corto plazo de una inesperada fuga de capitales en el exceso de riesgo bancario. El modelo predice el aumento sustancial a corto plazo de la tasa de morosidad bancario que se dio luego de la fuga de capitales que ocurrió en Perú en 1998. En el tercer capítulo, extiendo el modelo del capítulo 1 para estudiar el rol del tipo de cambio real en las decisiones de riesgo de los bancos después un recorte de la tasa de interés extranjera. El modelo sugiere que los efectos de equilibrio general en el tipo de cambio real reducen la caída de la toma excesiva de riesgo, que se encuentra en el capítulo 1, producto de un recorte en la tasa de interés foránea.
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Costa, Luis Filipe Pereira da. "Oligopoly and capital accumulation in a small open economy." Thesis, University of York, 1999. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.323688.
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AREOSA, WALDYR DUTRA. "INFLATION DYNAMICS IN BRAZIL: THE SMALL OPEN-ECONOMY CASE." PONTIFÍCIA UNIVERSIDADE CATÓLICA DO RIO DE JANEIRO, 2004. http://www.maxwell.vrac.puc-rio.br/Busca_etds.php?strSecao=resultado&nrSeq=4914@1.
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BANCO CENTRAL DO BRASILEste trabalho deriva e estima um modelo estrutural para a inflação em economia aberta. O modelo representa a Curva de Phillips Neo-Keynesiana padrão (CPNK) e a Curva Híbrida de Gali e Gertler (1999) como casos particulares. Foram gerados dois conjuntos de estimativas para a economia brasileira, tratada inicialmente como uma economia fechada e a seguir como uma pequena economia aberta. De acordo com a literatura recente, o modelo considera medidas de custo marginal como indicador relevante para a inflação e apresenta inércia inflacionária. Alguns dos resultados podem ser sintetizados da seguinte forma: (i) O Brasil, quando tratado como uma economia fechada, apresenta um grau consideravelmente maior de rigidez nominal do que Estados Unidos e Europa, bem como um elevado índice de indexação; (ii) Em economia aberta com indexação, a aceleração do câmbio nominal acrescido da inflação externa afeta a inflação ao consumidor, efeito este amplificado quanto maior a abertura da economia; (iii) O impacto das variáveis relacionadas a abertura econômica apresenta um pequeno impacto direto, com o somatório de seus coeficientes próximo a zero; (iv). Contudo, o impacto indireto é significativo, alterando consistentemente os pesos associados a inflação defasada e a expectativa da inflação futura.
This work develops and estimates a structural model for inflation in open economies. The model nests the standard New-Keynesian Phillips Curve (NKPC) and the hybrid curve of Gali and Gertler (1999) as particular cases. Two sets of estimates were generated for the Brazilian economy, treated at first as a closed economy and afterwards as a small open economy. In line with recent literature, the model presents inflation inertia and considers a marginal cost measure as the relevant indicator for inflation. Some of the findings can be summarized as follows: (i) Brazil, when treated as a closed economy, shows a considerably higher degree of nominal stickiness than United States and Europe, the same occurs with the level of indexation; (ii) In open economy with indexation, the acceleration of the nominal exchange rate together with external inflation affects consumer inflation, being this effect amplified by the economy s openness; (iii) The direct impact of the variables related to the economy s openness on inflation is small, with the sum of its coeficients close to zero; (iv) However, the indirect impact is significant since it consistently changes the weights associated with lagged inflation and future inflation expectation.
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Buainain, Sarquis Sarquis José. "Business cycles in a credit constrained small open economy." Thesis, London School of Economics and Political Science (University of London), 2009. http://etheses.lse.ac.uk/2549/.
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This thesis addresses the sources and propagation mechanisms of business cycles in small open emerging economies. Vector autoregressive analyses (Chapter 1) of Brazil - whose regularities are common to other emerging economies - show that exogenous global credit disturbances affecting international liquidity, uncertainty and risk appetite account for over 40% of output variability. These disturbances explain the bulk of emerging economies' excess macroeconomic volatility. They transmit via credit frictions, mainly as shocks to the real interest rates that emerging economies face in international markets. They comprise about 60% of the country spread variations. Responses of output and other real aggregates to credit shocks reveal growth persistence, hump-shaped recession and recovery patterns. These regularities are examined within proposed dynamic stochastic general equilibrium models of a small open economy with permanently binding endogenous constraint on foreign credit. When accumulating capital works as collateral in the constraint, the model (Chapter 2) exhibits unprecedented intertemporal propagation, mainly through wedges between consumption's marginal rate of substitution and the return on capital. Interest rate shocks have significant persistent effects which mitigate the dominance of uncorrelated productivity shocks. The model nests properties of real business cycle models and overcomes typical anomalies of small open economy models which are derived from weak consumption substitution effects. A second model (Chapter 3) tackles the macroeconomic implications of country spread as an endogenous state variable affecting credit and business cycles. The spread is built into an endogenous credit constraint, similar to an external financial premium. Amplification and propagation mechanisms are further enhanced through an enriched intertemporal wedge. Independent US real interest rate and exogenous country spread shocks - representing exogenous credit disturbances to emerging economies - are equally important over business cycle horizons. Calibrated for Brazil, both models match qualitative and quantitative regularities empirically observed in response dynamics, second moments and variance decompositions.
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Ikeda, Akihiko. "Essays on Business Cycles in Small Open Economies." Kyoto University, 2020. http://hdl.handle.net/2433/254502.
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Zhou, Ting. "Dynamic multivariate analysis of a small open economy: The case of Hawai'i." Thesis, University of Hawaii at Manoa, 2003. http://hdl.handle.net/10125/1273.
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The main objective of the dissertation is to apply recent advances in modern econometric analysis, namely cointegrating Vector Autoregression (VAR) and Bayesian VAR (BVAR) to a small open regional economy like Hawaii. This is accomplished in three related yet independent essays demonstrating how regional modeling and forecasting can benefit from these latest developments. The first essay concentrates on the cointegrating VAR analysis, applying it to Hawaii's premier industry-tourism. Recent research in the literature on identified cointegrating VARs emphasizes the need to rely on economic theory to impose weak exogeneity assumptions, guide the search for long-run just (over) identifying restrictions and shrink the model to the most parsimonious representation. While cointegration analysis has gradually appeared in the empirical tourism literature, the focus has been exclusively on the demand side with no use of the latest identification techniques. A complete Hawaii tourism model is developed, exploiting Hall, Henry, and Greenslade's (2002) theory-directed sequential reduction methodology. Both demand and supply factors are emphasized in identifying long-run cointegrating relationships. The second essay applies the BVAR methodology to another key sector in regional modeling-construction. This essay represents the first application of priors on linear combinations of parameters-namely, sums of coefficients and dummy initial observation priors - in a BVAR construction forecasting model. I find that including these priors does not necessarily improve forecast accuracy at medium to long horizons, especially when the series are integrated and there is more than one cointegrating relationship. The third essay extends the second essay to deal with the entire regional economy. All regional models must deal with the inavailability of expenditure data at the state and local levels. This problem typically leads researchers to use either a single highly restricted VAR, or BVAR, or a model of pseudo theory driven equations. In contrast, my third essay makes use of BVAR blocks to model proxies for the expenditure categories in a traditional macro structure. Compared with existing regional BVAR models, the current setup is more complete in accounting for both the intra-action of sectors within the region and the inter-action of the region with external drivers.
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Zhu, Lin. "Three essays on asset bubbles and economic growth in a small open economy." Thesis, University of Macau, 2018. http://umaclib3.umac.mo/record=b3959330.
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Osakwe, Patrick N. "Commodity aid, borrowing and employment in a small open economy." Thesis, National Library of Canada = Bibliothèque nationale du Canada, 1997. http://www.collectionscanada.ca/obj/s4/f2/dsk3/ftp04/nq20574.pdf.
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Dzhambova-Andonova, Krastina B. "Macroeconomic Implications of Fiscal Policy in a Small Open Economy." Thesis, Boston College, 2018. http://hdl.handle.net/2345/bc-ir:108102.
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Thesis advisor: Peter N. IrelandThis dissertation deals with the macroeconomic implications of fiscal policy in small open economies with a particular emphasis on emerging economies. I use both empirical and theoretical approaches to distinguish key difference in the design of fiscal policy between emerging and developed economies. I also analyze the macroeconomic consequences of differences in the conduct of fiscal policy. Thus, the dissertation is focused on the interplay between fiscal policy and business cycle dynamics. Recent policy challenges in developed economies, such as monetary authorities grappling with the zero lower bound on short run nominal rates and fiscal stimulus packages emerging as an important policy tool, have sparked renewed academic interest in the topic of fiscal policy and business cycles. Institutional and macroeconomic features in emerging economies make the macroeconomic aspects of fiscal policy an important research agenda and one to which this dissertation contributes. A number of papers have documented fiscal policy pro-cyclicality in terms of stronger co-movement between government expenditure and macroeconomic fundamentals in emerging and developing economies. This feature of the data raises 2 important questions: 1) does fiscal policy reinforce the macroeconomic cycle in these countries leading to heighten macroeconomic volatility ("when it rains, it pours"), and 2) is the fiscal stance in these economies due to unique macroeconomic features or is it the consequence of institutional and political imperfections? The first chapter, titled "When it rains, it pours": fiscal policy, credit constraints and business cycles in emerging and developed economies, sets out to answer these questions by comparatively studying a group of developed and emerging economies. I estimate a panel structural vector autoregressive model to investigate if government consumption expenditure responds more pro-cyclically to fundamentals and what role international financial conditions play for the fiscal stance and for the volatility of the cycle in emerging and developed economies. My findings suggest that the response to output fluctuations is not systematically different for emerging governments relative to their developed counterparts. However, emerging governments curtail spending in response to increases in the sovereign borrowing rate which forces their consumption expenditure to act more pro-cyclically. I find evidence of higher fiscal discretion in emerging economies. However, the efficacy of government consumption expenditure is substantially lower in emerging than in developed economies. Thus, fiscal policy ends up being responsible for a lower share of business cycle volatility in emerging than in developed economies. In the second chapter, titled Estimating the Dynamics of Fiscal Financing in Emerging Economies, I propose a strategy for estimating the government financing rule for an emerging economy. The estimation uses the structural VAR impulse responses obtained in the previous chapter to discipline the parameters of a small open economy real business cycle model with a public sector. The parameters can be split into two groups: those influencing the effectiveness of fiscal policy and the parameters governing the financing of the exogenous stream of government consumption. The empirical response to interest rate shocks puts restrictions on the first group of parameters governing the size of the multiplier. The empirical response to a government consumption shock can be used to obtain estimates of the fiscal policy rule. I construct a model with a role for both interest rate shocks and government consumption shocks. A natural estimation approach in this case is impulse response matching
Thesis (PhD) — Boston College, 2018
Submitted to: Boston College. Graduate School of Arts and Sciences
Discipline: Economics
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Charusreni, Youthapoom. "Fiscal policy and optimal tax in a small-open economy." Thesis, Durham University, 2018. http://etheses.dur.ac.uk/12515/.
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The thesis studies the effect of fiscal policy on a small-open economy by estimating the DSGE Model calibrated for Thailand. The considered fiscal policies are composed of an increase in government spending and a decrease in tax rates, namely, a sales tax, a payroll tax, and a capital income tax. The model foundation is adopted from The Bank of Thailand Structural Model which is introduced by Tanboon (2008). This thesis extends the model and introduces a rich fiscal block for analysis of the effect of fiscal policy. The important findings are that the impact of fiscal policy on a small-open economy is smaller than the one on a closed economy. An increase in government expenditures has a positive impact on the domestic firms' output, whereas exporting firms respond by lowering their production. The impact multiplier of government spending on the national output is 0.25 and the impact multipliers of sales tax, payroll tax, and capital tax are 0.08, 0.37 and 0.09, respectively. The second paper studies the optimal capital income tax and optimal labour income tax in a small-open economy with an imperfectly competitive market and habit formation preferences. This paper uses numerical estimates and analytical investigation. The numerical approach solves the Ramsey problem, by parameterizing to Thailand data. The numerical finding indicates that the optimal capital income tax appeared to be negative. The analytical investigation simplifies the models in order to explain factors that influence the numerical results. The analytical results highlight that i) the optimal capital income tax in a small-open economy with a perfectly competitive market is not different with optimal capital income tax in a closed economy and equals to zero, ii) the optimal capital income tax in small open-economy with an imperfectly competitive market is negative and negatively related to price markup, iii) the deep habit preferences create a volatile and countercyclical markup, hence, the capital income tax is not smooth over the horizon. It should be increased during an economic boom period and lower in recessions. The third paper examines the impact of the government spending on health on the economic growth by analyzing the improvement in national health condition. The research questions are i) what is the effect of the government spending on health on the improvement in national health indicators, such as life expectancy, infant mortality, and under-five mortality, ii) does an improvement in human capital on health leads to an economic growth. Three panel estimations are implemented: fixed-effect model, random-effect model, and the mean group estimator. The main findings show that the government spending on health has a significantly positive effect on the health status. An increase in life expectancy has a positive effect on output in developing countries but does not have a significant effect on output in developed countries. In addition, non-medical determinants of health, such as tobacco consumption and alcohol consumption have a significant effect on economic growth of OECD countries.
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Montenegro, Santiago. "External shocks and macroeconomic policy in a small open developing economy." Thesis, University of Oxford, 1991. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.357399.
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Vehbi, Mustafa Tugrul. "Macroeconomic dynamics and financial variables : an empirical small open economy perspective." Thesis, University of Cambridge, 2011. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.609924.
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Chu, Mei-Lie. "Exchange rate and asset price dynamics in a small open economy." The Ohio State University, 1986. http://rave.ohiolink.edu/etdc/view?acc_num=osu1279736179.
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Lim, Sokchea. "ESSAYS ON A SMALL OPEN ECONOMY WITH CROSS-BORDER LABOR MOBILITY." OpenSIUC, 2013. https://opensiuc.lib.siu.edu/dissertations/718.
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The dissertation examines the macroeconomic impact of fiscal policy, including a recently-debated remittance tax in a small open economy that exports migrant workers and, at the same time, receives remittances sent by those migrants to families in the home country. The research also investigates the responses of optimal fiscal policy to shocks in either the home or the host country. Then, the empirical exercises are performed to determine the motivations behind remittances. More specifically, we test whether remittances come from existing migrants or result from migration when families at home experience income contraction caused by weather or natural disaster shocks. Chapter 1 provides some interesting findings. First, the results show that an economy with international migration is more resilient to demand shocks resulting from fiscal contraction. Second, the short-run association between remittances and domestic output depends on the sources of the shocks. Third, our results indicate that the equilibrium impact of a tax on remittances can be expansionary and welfare-improving when an economy is initially close to full employment. The presence of utility-enhancing government expenditures and a potential negative externality from over-allocation of labor abroad (over migration) justify the presence of distortionary taxes. Chapter 2 shows that an increase in remittances due to shocks in the host country increases consumption, but reduces domestic output due to labor migration. In such a case, optimal fiscal policy responds by lowering taxes on factor incomes to encourage domestic labor participation and increasing the remittance tax to curb labor migration. However, optimal policy response to shocks in the domestic economy is to raise all income taxes including factor incomes and remittances. Chapter 3 shows that there is no evidence that supports pure altruism hypothesis. Specifically, home income contraction due to natural disasters or weather shocks does not appear to induce existing migrants residing abroad to send more remittances. However, the results indicate that remittances increase as people experiencing the income shocks migrate to earn higher income abroad. The findings support our theoretical specification in the previous chapters that links remittances to international migration.
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Mano, Viktorija. "The vulnerabilities of a small open economy : the economic transition of Macedonia and the IMF." Thesis, University of Roehampton, 2016. https://pure.roehampton.ac.uk/portal/en/studentthesis/the-vulnerabilities-of-a-small-open-economy(6555e0e3-3bac-40e6-8eac-9dec7c3145d1).html.
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This dissertation explores the impact of the neo-liberal policy programme suggested by the International Monetary Fund’s (IMF) on the economic transition of Macedonia. The objective of this thesis is to investigate the extent to which the IMF stance impacted upon and influenced the policies of Macedonia. My work fits into a tradition of literature exploring the body of knowledge on economic growth. Specifically, this study provides an insight into the involvement of international financial institutions (IFI) and their contribution to the vulnerability of the present economic situation in Macedonia. I tackle this research through a combination of complexity theory and critical realism, which bring a contemporary perspective on economic policy and one that is frequently absent in the mainstream literature. By considering in depth the context that underlies to policy, complexity theory argues that complex systems cannot be analysed in isolation from their context. My critique of the IMF begins from this foundation and I challenge its universalising norms and the traditional economic theory they depend on. This thesis uses a mixed-methods approach with a predominantly qualitative focus. It employs quantitative analysis of secondary data, documentary analysis of the IMF reports issued for the Macedonian economy in the period 1992-2014, and qualitative analysis of primary data collected through semi-structured interviews. This study makes a theoretical contribution, by using the original perspective of complexity theory in the economic analysis of the economic reform process. Thus, the thesis can be considered as a useful case study that could be used more widely by those exploring small, open economies that are to some extent still struggling with the process of transition and the way they have been affected by the economic policies. Finally, considering the more narrowly focused investigation of the Macedonian context, this thesis contributes to the literature by exploring the Macedonian economy and its process of transition using literature in the local language.
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Thomas, Desmond. "Effects of devaluation in a small open economy with application to Jamaica." Thesis, McGill University, 1989. http://digitool.Library.McGill.CA:80/R/?func=dbin-jump-full&object_id=75994.
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This dissertation advances a model which assumes extreme openness characterised by the absence of nontradables. The pivotal relative price is the real wage which is of central importance in the analysis of devaluation. The model incorporates a simple supply function on the basis that the supply response to a devaluation cannot be taken for granted because of structural factors and unstable expectations characteristic of the transitional period following a devaluation. The effects of devaluation depend on a combination of factors among which are highlighted capitalists' expectations of future stability and the constraints on disabsorption. Our analysis underlines the need for financial assistance to sustain the adjustments associated with devaluation episodes. An econometric application of this model to Jamaica finds devaluation to be adverse both with respect to output growth and the trade balance.
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Litsios, Ioannis. "Neoclassical and Keynesian dynamics for a small open economy : An empirical analysis." Thesis, University of Essex, 2009. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.511041.
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Shim, Jae-Hun. "Essays on macroeconomic policy and its impact on the small open economy." Thesis, University of Bath, 2016. https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.699007.
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This thesis develops the small open economy DSGE model and applies Bayesian methods in order to investigate the implications of macroeconomic policy in the face of a number of challenges. In chapter 2, we construct a small open economy DSGE model with non-tradable goods and intermediate sectors under complete financial markets, and identify relative home producer price effects in the dynamics of main variables and optimal allocation. Also, by embedding intermediate sectors, we identify linkages between final and intermediate sectors. In chapter 3, we incorporate financial frictions and a global banking system in a small open economy DSGE model. We show that credit policy appears to be powerful in response to a negative leverage shock since an expansionary monetary policy shock leads to severe costs of capital flight, inflation and a sudden drop in deposits. However, when there is a negative capital quality shock, an expansionary monetary policy shock appears to be more effective than credit policy through lower real interest rates and a sharp depreciation of the terms of trade and the real exchange rate. In chapter 4, we estimate a model with financial frictions and global banking system for Korea and the U.S. using a Bayesian approach. We show that the main driving forces of business cycle fluctuations differ between countries, and that there are substantial frictions in the global banking sector. Therefore, a model analysis and macroeconomic policy without heterogeneous characteristics of each economy and frictions in global banking sector would be severely misleading.
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Galebotswe, Obonye. "Industrialization in a small open mineral-based economy : the case of Botswana." Master's thesis, University of Cape Town, 1997. http://hdl.handle.net/11427/17538.
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Bibliography: pages 71-75.After more than two decades of phenomenal economic expansion, Botswana now faces the challenge of slowing economic growth, rising unemployment and increasing poverty. The minerals sector, which dominated economic growth since the late seventies, has served the economy well in the past, but social and economic developments have reached a juncture where the broad strategic direction of the economy needs to be re-evaluated. The need to diversify the economy to reduce its reliance on mineral commodities has long been acknowledged by government. One of the sectors of the economy earmarked for diversification was the manufacturing sector. However, in spite of government efforts to promote this industry, the sector's contribution to Gross Domestic Product (GDP) has remained small and even declined in recent years. An investigation into those structural features of the economy which are responsible for this record and impose limitations on the sectors' future development is therefore of great relevance. This study attempts such an investigation by focusing mainly on one aspect of the problem: those features related to booms in the minerals sector. More specifically, the study examines the effect of the real exchange rate and real wage rate movements. It also uses case study and survey data to gain insight into other major factors responsible for industrial development and to corroborate the conclusions reached on the basis of macro-economic data. The data collected suggest that Botswana has managed its mineral windfalls relatively well. It shows that the major effects through which mineral windfalls corrode competitiveness of industry -- real exchange rate appreciation and real wage rate increases have been successfully avoided. It is argued, therefore, that the country's industrial backwardness does not necessarily arise from booms in the mining sector. This conclusion is supported by the firm survey which found that low productivity, high utility costs and the lack of skilled labour to be the major impediments to industrial development. The study is intended as a contribution to understanding of the impact of mineral windfalls on the industrial development process in Botswana, but it also offers some policy prescriptions. The major policy recommendations that emerge are that wage rate increases should be tied to productivity improvements, productivity should be raised to international levels through training and the exchange rate be managed in such a manner that it does not undermine the ability of industry to compete in the Southern African Customs Union market.
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Mahapatra, Saswati. "Significance of domestic loans in a small open economy a credit view model /." Access to citation, abstract and download form provided by ProQuest Information and Learning Company; downloadable PDF file, 297 p, 2010. http://proquest.umi.com/pqdweb?did=1992508751&sid=2&Fmt=2&clientId=8331&RQT=309&VName=PQD.
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Moradi, Mohammad Ali. "Dynamic modelling of inflation in a small open economy : the case of Iran." Thesis, University of Liverpool, 2000. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.366712.
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Raimondos, Pascalis. "Direct foreign investment and welfare in a small open economy : a theoretical analysis." Thesis, University of Essex, 1990. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.277592.
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Sher, Galen. "News media, asset prices and capital flows: evidence from a small open economy." Master's thesis, University of Cape Town, 2017. http://hdl.handle.net/11427/25505.
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Objectives: This work investigates the role for the content of print news media in determining asset prices and capital flows in a small open economy (South Africa). Specifically, it examines how much of the daily variation in stock prices, bond prices, trading volume and capital flows can be explained by phrases in the print news media. Furthermore, this work links such evidence to the existing theoretical and empirical literature. Methods: This work employs natural language processing techniques for counting words and phrases within articles published in national newspapers. Variance decompositions of the resulting word and phrase counts summarise the information extracted from national newspapers in this way. Following previous studies of the United States, least squares regression relates stock returns to single positive or negative 'sentiment' factors. New in this study, support vector regression relates South African stock returns, bond returns and capital flows to the high-dimensional word and phrase counts from national newspapers. Results: I find that domestic asset prices and capital flows between residents and non-residents reflect the content of domestic print news media. In particular, I find that the contents of national newspapers can predict 9 percent of the variation in daily stock returns one day ahead and 7 percent of the variation in the daily excess return of long-term bonds over short-term bonds three days ahead. This predictability in stocks and bonds coincides with predictability of the content of domestic print news media for net equity and debt portfolio capital inflows, suggesting that the domestic print news media affects foreign residents' demand for domestic assets. Moreover, predictability of domestic print news media for near future stock returns is driven by emotive language, suggesting a role for 'sentiment', while such predictability for stock returns further ahead and the premium on long-term bonds is driven by non-emotive language, suggesting a role for other media factors in determining asset prices. These results do not seem to reflect a purely historical phenomenon, finite-sample biases, reverse causality, serial correlation, volatility or day-of-the-week effects. The results support models where foreign agents' short-run beliefs or preferences respond to the content of domestic print news media heterogeneously from those of domestic agents, while becoming more homogeneous in the medium term.
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Almeida, Vanda Regina Guimarães de. "Bayesian estimation of a DSGE model for the Portuguese economy." Master's thesis, Instituto Superior de Economia e Gestão, 2009. http://hdl.handle.net/10400.5/2775.
Full textAbstract:
Mestrado em Econometria Aplicada e PrevisãoIn this paper, a New-Keynesian DSGE model for a small open economy integrated in a monetary union is developed and estimated for the Portuguese economy, using a Bayesian approach. Estimates for some key structural parameters are obtained and a set of exercises exploring the model's statistical and economic properties are performed. A survey on the main events and literature associated with DSGE models that motivated this study is also provided, as well as a comprehensive discussion of the Bayesian estimation and model vali¬dation techniques applied. The model features five types of agents namely households, firms, aggregators, the rest of the world and the government, and includes a number of shocks and frictions, which enable a closer matching of the short-run properties of the data and a more realistic short-term adjustment to shocks. It is assumed from the outset that mone¬tary policy is defined by the union's central bank and that the domestic economy's size is negligible, relative to the union's one, and therefore its specific economic fluctuations have no influence on the union's macroeconomic aggregates and monetary policy. An endogenous risk-premium is considered, allowing for deviations of the domestic economy's interest rate from the union's one. Furthermore it is assumed that all trade and financial flows are per¬formed with countries belonging to the union, which implies that the nominal exchange rate is irrevocably set to unity.
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Vitek, Francis. "Monetary policy analysis in a small open economy : development and evaluation of quantitative tools." Thesis, University of British Columbia, 2007. http://hdl.handle.net/2429/31703.
Full textAbstract:
This doctoral thesis consists of four papers, the unifying theme of which is the development and evaluation of quantitative tools for purposes of monetary policy analysis and inflation targeting in a small open economy. These tools consist of alternative macroeconometric models of small open economies which either provide a quantitative description of the monetary transmission mechanism, or yield a mutually consistent set of indicators of inflationary pressure together with confidence intervals, or both. The models vary considerably with regards to theoretical structure, and are estimated with novel Bayesian procedures. In all cases, parameters and trend components are jointly estimated, conditional on prior information concerning the values of parameters or trend components. The first paper develops and estimates a dynamic stochastic general equilibrium or DSGE model of a small open economy which approximately accounts for the empirical evidence concerning the monetary transmission mechanism, as summarized by impulse response functions derived from an estimated structural vector autoregressive or SVAR model, while dominating that SVAR model in terms of predictive accuracy. The primary contribution of this first paper is the joint modeling of cyclical and trend components as unobserved components while imposing theoretical restrictions derived from the approximate multivariate linear rational expectations representation of a DSGE model. The second paper develops and estimates an unobserved components model for purposes of monetary policy analysis and inflation targeting in a small open economy. The primary contribution of this second paper is the development of a procedure to estimate a linear state space model conditional on prior information concerning the values of unobserved state variables. The third paper develops and estimates a DSGE model of a small open economy for purposes of monetary policy analysis and inflation targeting which provides a quantitative description of the monetary transmission mechanism, yields a mutually consistent set of indicators of inflationary pressure together with confidence intervals, and facilitates the generation of relatively accurate forecasts. The primary contribution of this third paper is the development of a Bayesian procedure to estimate the levels of the flexible price and wage equilibrium components of endogenous variables while imposing relatively weak identifying restrictions on their trend components. The fourth paper evaluates the finite sample properties of the procedure proposed in the third paper for the measurement of the stance of monetary policy in a small open economy with a Monte Carlo experiment. This Bayesian estimation procedure is found to yield reasonably accurate and precise results in samples of currently available size.Arts, Faculty of
Vancouver School of Economics
Graduate
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Sager, Daniel. "A model for housing markets in a small open economy (the case of Switzerland) /." [S.l. : s.n.], 2003. http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&doc_number=010609117&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA.
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Jawhary, Muna H. "Favourable exogenous shocks and industrialisation in a small open economy : the case of Jordan." Thesis, SOAS, University of London, 1994. http://eprints.soas.ac.uk/28924/.
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The subject of this study is the influence of favourable exogenous shocks on the structure of prices and output composition in small open economies. The study is based, theoretically, on the Dutch Disease theory; and, empirically, on research conducted on Jordan. Under general equilibrium conditions, a boom in a traded sector is likely to produce a contraction of output and employment in non-booming traded sectors - de-industrialisation. This is the essence of the Dutch disease theory, its conclusions valid only within its particular set of assumptions about factor-market underpinnings of the model, including macro-equilibrium and full employment, fixed national stock of labour and capital, and perfect capital markets; and unchanging technical conditions of production. Furthermore, changes in the structure of demand that underlie the process of industrialisation are ignored, as the model assumes growth, other than that generated by the windfall gain, away. The present study contests this analytical approach, and offers an alternative that considers initial conditions of disequilibrium and conducts dynamic analysis to show the effects of demand expansion, with its disproportionately large stimulus to manufacturing, on these conditions. Demand-led output growth combined with supply-side changes induced by booming conditions leads to rapid productivity growth in manufacturing, by both increasing production efficiency and inducing technological advance. The outcome of these inter-linked supply-demand changes is an acceleration of industrialisation. The study thus presents an antithesis to the Dutch disease hypothesis. After an overview of the Dutch disease theory, the study discusses the necessary modifications when certain characteristics of industrialising economies are taken into consideration. The focus of the analysis is the Dutch disease theory's assumptions, its level of abstraction, and the static nature of its analysis. Various countries' experience of booms are presented to show that the outcome of sectoral shifts is crucially dependent on the pre-boom economic conditions; and thus to show also that boom experiences of industrial and industrialising economies differ considerably. The discussion of Jordan starts by outlining that country's historical experience of sectoral shifts. The counterfactual to the Dutch disease is established with the aid of trend analysis, and it is shown that at the end of the boom, the share in aggregate output of agriculture was smaller, and that of manufacturing larger, than 'expected' from historical trends. Dutch disease analysis is used to show that resource mobility and the spending effect have induced currency appreciation, as would have been predicted by the theory. Contrary to the theory's predictions, however, the examination of the commodity trade balance reveals significant growth in agricultural and manufacturing exports during the boom. The study then examines the reasons behind the discrepancy between the theory and this empirical observation. The performance of agriculture and manufacturing are examined separately. In both sectors booming conditions brought about rapid technological advance which expanded profits in these sectors. In addition, the disproportionately large demand for manufactured goods, both for consumption and investment, led to a rapid expansion of this sector's share in aggregate output; which was compensated for by a decline in that of agriculture. Seen in this light, the decline in the share of agriculture was a manifestation of successful industrialisation, rather than the Dutch disease effect.
32
Swift, Robyn, and n/a. "Exchange Rate Pass-Through in a Small Open Economy: the Case of Australian Export Prices." Griffith University. School of Economics, 2001. http://www4.gu.edu.au:8080/adt-root/public/adt-QGU20050921.140213.
Full textAbstract:
Expectations regarding the relationship between exchange rates and the prices of traded goOds in small open economies have traditionally been derived from the idea of the relative unimportance of a single small country when trading in much larger international markets. This concept has led to the use of distinct 'small-country' or 'dependent-economy' models to analyse the effects of macroeconomic changes. Thus for small economies like Australia, it is usually assumed that the foreign-currency prices of traded goods are fixed in perfectly competitive international markets. Accordingly, exchange rate movements must be completely absorbed in domestic-currency prices. In other words, the pass-through of exchange rate changes to destination-currency prices must be zero for Australian exports, and complete for Australian imports. Such expectations regarding the degree of exchange rate pass-through contrast sharply with those found in conventional macroeconomic models for large countries, in which pass-through is assumed to be complete for all traded goods. Moreover, they conflict with the results derived from the large theoretical and empirical literature on the microeconomic determinants of pass-through, which suggests that much international trade takes place in imperfectly competitive markets, in which the degree of less-than-complete pass-through depends on industry-specific factors. This study explores these apparent conflicts by re-examining the small-country assumption, with particular emphasis on export prices as the area of greatest divergence. Specifically, it addresses three research questions: 1) What are the theoretical conditions that underlie the small-country assumption? 2)What are the implications for the macroeconomic models of small economies if this assumption is violated? 3) In practice, is the data more consistent with the validity or otherwise of the assumption? The analysis focuses on Australia as a practical example of a small open economy with a high proportion of commodity exports. In summary, the theoretical and empirical results reported in this study suggest that the small-country assumption is unlikely to hold in practice. That is, exchange rate pass-through is more likely to be determined by industry-specific factors, rather than by the universal conclusion of zero pass-through for all Australian exports that is derived from the small-country assumption. Further, they imply that the movement in internal prices required to restore equilibrium in a small country following an external shock is likely to be both larger and more uncertain than has previously been expected. Under such circumstances, the full flexibility of the exchange rate, as the primary and most rapid source of the required adjustments, becomes particularly significant. An important policy implication for small open economies that are subject to frequent terms of trade shocks, such as Australia, is that attempts to manage the exchange rate in order to reduce apparently excessive movements may in fact result in a longer and more protracted process of adjustment through the labour market.
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Yoon, Yeo Hun. "Stabilization program in a small semi-open economy with foreign debts and controlled interest rates." Connect to resource, 1987. http://rave.ohiolink.edu/etdc/view.cgi?acc%5Fnum=osu1262692922.
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Blondal, S. "Export supply shocks, credit and macroeconomic policy in a small, open economy : Iceland 1960-80." Thesis, University of Cambridge, 1986. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.383051.
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趙換兒 and Wun-yi Natalie Chiu. "Monetary and exchange rate policies in a small open economy: a case study of Singapore." Thesis, The University of Hong Kong (Pokfulam, Hong Kong), 1993. http://hub.hku.hk/bib/B31211343.
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Zhao, Yan. "Essays On Small Open Economy Models." Thesis, 2011. http://spectrum.library.concordia.ca/35923/4/Zhao_phd_F2011.pdf.
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37
Kao, Tzu-Min, and 高慈敏. "Business Cycle in Small Open Economy." Thesis, 1997. http://ndltd.ncl.edu.tw/handle/46389809608305467922.
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Hsieh, Chin-Yi, and 謝金怡. "Inventory Investment in a Small Open Economy." Thesis, 2007. http://ndltd.ncl.edu.tw/handle/86470509184673934035.
Full textAbstract:
碩士國立臺灣大學
經濟學研究所
95
This paper investigates the business cycle properties in Singapore with particular attention to the behavior of inventory investment. We first document the stylized facts of business cycles in Singapore and then develop a dynamic stochastic general equilibrium (DSGE) model of a small open economy to account for those stylized facts. The results show that the benchmark model captures several features of business cycles in Singapore. However, there are some discrepancies between the model and the data, especially with regard to the cyclicality of inventory investment. We introduce three modifications to attempt to resolve the discrepancies: 1. adding a demand shock; 2. choosing labor hours one period in advance; 3. changing the parameter that determines the elasticity of substitution among productive factors. The first two modifications fail to improve the fit of the model enough to resolve the discrepancies. Although the last modification succeeds in improving the fit of the correlation between inventory investment and output, it worsens the prediction of the model with regard to the relative volatility of output and sales.
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Lin, Mei-Yin, and 林枚吟. "Monetary Policy in a Small Open Economy." Thesis, 2000. http://ndltd.ncl.edu.tw/handle/04811222851928682334.
Full textAbstract:
博士國立臺灣大學
經濟學研究所
88
This paper investigates the performance of a monetary rule (suggested by Bennett McCallum) that sets the monetary base to keep nominal GDP growing at a noninflationary rate. Moreover, we modify the monetary rule to respond to the varation of stock price or exchange rate. The simulation results indicate that the basic rule could be an improvement in smoothing niminal GDP over a discretionary policy. Hiwever, the effects in stabilizing the stock market and foreign exchange market are insignificant.
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Hsieh, Chin-Yi. "Inventory Investment in a Small Open Economy." 2007. http://www.cetd.com.tw/ec/thesisdetail.aspx?etdun=U0001-2407200715073000.
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"Endogenous time preference in small open economy models." 2004. http://library.cuhk.edu.hk/record=b5891992.
Full textAbstract:
Chan Chung Yan.Thesis (M.Phil.)--Chinese University of Hong Kong, 2004.
Includes bibliographical references (leaves 57-59).
Abstracts in English and Chinese.
Abstract --- p.i
Acknowledgement --- p.iv
Table of Contents --- p.v
List of Figures --- p.vi
Chapter 1. --- Introduction --- p.1
Chapter 2. --- An Illustration with a Small Open Economy Model
Chapter 2.1 --- Review of Obstfeld (1990) --- p.4
Chapter 2.2 --- A Model with Socially-Determined Time Preference --- p.6
Chapter 3. --- Small Open Economy Models with Socially-Determined Time Preference --- p.15
Chapter 3.1 --- The Laursen-Metzler Effect --- p.16
Chapter 3.2 --- Exchange-Rate Dynamics --- p.21
Chapter 3.3 --- Capital Mobility and Devaluation --- p.28
Chapter 4. --- Dynamics of a Small Open Economy Model with Non-Flat Bond Curves --- p.35
Chapter 4.1 --- Downward-Sloping Bond Curve --- p.38
Chapter 4.2 --- Upward-Sloping Bond Curve --- p.38
Chapter 5. --- Investment and Saving in a Small Open Economy Model with Capital Accumulation
Chapter 5.1 --- The Model --- p.41
Chapter 5.2 --- Productivity Shocks --- p.46
Chapter 6. --- Saddle-Path Stability of a Closed Economy Growth Model --- p.49
Chapter 7. --- Conclusion --- p.54
References --- p.57
Appendix --- p.60
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Yang, Po-Chieh, and 楊博傑. "Investment-specific Technology in a Small Open Economy." Thesis, 2007. http://ndltd.ncl.edu.tw/handle/77591045436498073895.
Full textAbstract:
碩士國立臺灣大學
經濟學研究所
95
We set up a small open economy model base on Letendre and Luo (2007). The model includes neutral technology shocks and investment-specific technology shocks and is calibrated to annual Singapore data. We find that the investment-specific change may be an important factor of the output growth in the long run, but is not helpful to explain the fluctuation of the output. The impulse responses of the selected variables to the nuetral technology shock is larger than the investment-specific technology .In addition, the model can match the sign of the data moment but cannot match the data moment very well.
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Kuo, Ya-Chu, and 郭雅筑. "Asymmetric Froeign Exchange Interventionin a Small Open Economy." Thesis, 2009. http://ndltd.ncl.edu.tw/handle/69735539174620963733.
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Yang, Po-Chieh. "Investment-specific Technology in a Small Open Economy." 2007. http://www.cetd.com.tw/ec/thesisdetail.aspx?etdun=U0001-2307200711544100.
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LI, JHENG-HAN, and 李政漢. "Corruption and Economic Growth：An Analysis of Small Open Economy Growth Model." Thesis, 2010. http://ndltd.ncl.edu.tw/handle/12929727238926487604.
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Yueh, Chun-Hao, and 岳俊豪. "Government financing, monetary shock and economic growth-small open monetary economy." Thesis, 2003. http://ndltd.ncl.edu.tw/handle/89621116455448330960.
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47
Hung, Pei-Chen, and 洪珮甄. "Money and Belief-Driven Economic Growth: A Small Open Economy Analysis." Thesis, 2011. http://ndltd.ncl.edu.tw/handle/86492633141232868886.
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Yang, Chin-hao, and 楊志浩. "The Superneutrality of Money in a Small Open Economy." Thesis, 1999. http://ndltd.ncl.edu.tw/handle/33614647446804903599.
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49
Wang, Xing-bin, and 王星斌. "Inflation,growth and welfare in a small open economy." Thesis, 2009. http://ndltd.ncl.edu.tw/handle/m2yxqa.
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50
Doojav, Gan-Ochir. "A small open economy modelling: A Bayesian DSGE approach." Phd thesis, 2016. http://hdl.handle.net/1885/101520.
Full textAbstract:
Examining the business cycle and the monetary transmission
mechanism in a small open economy based on the macroeconomic
models is vital for successfully implementing forward-looking and
counter-cyclical macroeconomic policies. In the context, this
thesis focuses on the importance of various modelling
implications (i.e., frictions and shocks) in developing
empirically viable small open economy dynamic stochastic general
equilibrium (DSGE) models. The thesis comprises three
self-contained chapters on formulating, estimating and evaluating
the DSGE models using Bayesian methods and data for Australia and
the United States (US) (or G7 for Chapter 2), as well as a
general thesis introduction and conclusion.
Chapter 2 investigates the quantitative role of a cost channel of
monetary policy and an uncovered interest rate parity (UIP)
modification in an estimated small open economy DSGE model. For
this purpose, a small open economy New Keynesian DSGE model
developed by Justiniano and Preston (2010a) (i.e., benchmark
model for the thesis) is augmented to incorporate the cost
channel and the UIP modification based on a forward premium
puzzle. The empirical analysis shows that introducing the cost
channel and the UIP modification into the estimated model
improves its ability to fit business cycle properties of key
macroeconomic variables and to account for the empirical evidence
on the monetary transmission mechanism.
Chapter 3 assesses the importance of news shocks in a small open
economy DSGE model for analysing business cycle properties of
macroeconomic aggregates, including labour market variables. To
this end, the model in Chapter 2 is enlarged in Chapter 3 to
include (i) the theory of invoulntary unemployment proposed by
Galí (2011), (ii) an endogenous preference shifter, similar to
that used by Galí et al. (2011), and (iii) both news
(anticipated) and unanticipated components in each structural
shock. The results show that the estimated model is able to
qualitatively replicate the existing VAR-based results (e.g.,
Kosaka 2013, Kamber et al. 2014 and Theodoridis and Zanetti 2014)
on news driven business cycles, and the presence of news shocks
has the potential to improve the model fit. Another important
finding is that news shocks have been the main drivers of the
Australian business cycle in the inflation-targeting period.
Chapter 4 examines the significance of financial frictions and
shocks in a small open economy DSGE model for explaining
macroeconomic fluctuations. In doing so, Chapter 4 has further
extended the model in Chapter 3 to a rich DSGE model in the
two-country setting with involuntary unemployment, financial
frictions and shocks. The main results include (i) the presence
of financial accelerator improves the model fit, (ii) the
financial accelerator amplifies and propagates the effects of
monetary policy shocks on output, but dampens the effects of
technology and labour supply shocks in Australia and the US, and
(iii) financial shocks (i.e., shocks to the credit spread) are
important for explaining investment and output fluctuations in
both countries.
Finally, this thesis provides implications for designing
macroeconomic policies and building empirically viable open
economy DSGE models to analyse the transmission mechanism of
monetary policy and the business cycle.