Cover IMF Working Papers
A Small Structural Monetary Policy Model for Small Open Economies with Debt Accumulation
Author: Mr. Philippe D Karam and A. R. Pagan
Series:
IMF Working Papers
Volume/Issue:
Volume 2008: Issue 064
Language:
English
Publication Date:
01 Mar 2008
DOI:
https://doi.org/10.5089/9781451869262.001
ISBN:
9781451869262
ISSN:
1018-5941
Pages:
22
Keywords:
WP
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We extend a small New Keynesian structural model used for monetary policy analysis to address a richer class of policy issues that arise in open economy analysis. We draw a distinction between absorption and domestic output, and as the difference between the two is effectively the current account, there is now an explicit accumulation or decumulation of foreign liabilities in response to various shocks affecting the system. Such stock equilibria can now have an impact back on to the flows in the domestic economy. We perform simulations using parameters calibrated to the Canadian economy and compare the differences in impulse responses from the original model. Advantages in a forecasting environment owing to the ability to impose explicit projections about imports and exports are also exposed.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund