We found a match
Your institution may have rights to this item. Sign in to continue.
- Title
DYNAMICS OF OPEN-ECONOMY BUSINESS-CYCLE MODELS: ROLE OF THE DISCOUNT FACTOR.
- Authors
Sunghyun Henry Kim; M. Ayhan Kose
- Abstract
This paper examines the dynamic implications of different preference formulations in open-economy business-cycle models with incomplete asset markets. In particular, we study two preference formulations: a time-separable preference formulation with a fixed discount factor, and a time-nonseparable preference structure with an endogenous discount factor. We analyze the moment implications of two versions of an otherwise identical open-economy modelone with a fixed discount factor and the other with an endogenous discount factorand study impulse responses to productivity and world real-interest-rate shocks. Our results suggest that business-cycle implications of the two models are quite similar under conventional parameter values. We also find that the approximation errors associated with the solutions of these two models are of the same magnitude.
- Subjects
BUSINESS cycles; LABOR productivity; FREE enterprise; INTEREST rates; ECONOMIC policy
- Publication
Macroeconomic Dynamics, 2003, Vol 7, Issue 2, p263
- ISSN
1365-1005
- Publication type
Article
- DOI
10.1017/S1365100501010252