Three essays in new open economy macroeconomics with multiple countries, non-tradable goods, capital accumulation and distribution sector

Abstract

This thesis aims at developing and applying the New Open Economy Macroeco- nomics (NOEM) models to the open economy issues. Chapter 1 is a non-technical introduction of my research. In Chapter 2, Do non-tradable sector and capital stock matter in New Open Economy Macroeconomics models? I evaluate the effects of adding non-tradable sector and cap- ital stock on improving NOEM models' ability to capture the features of the data. I first construct and estimate a benchmark model with tradable, non-tradable sectors and capital stock with Bayesian techniques. The benchmark model is then compared with other two models: the model without non-tradable sector and the model without capital. The model comparison shows that the two models with capital outperform the model without it. Meanwhile, the performance of the benchmark model is only slightly better than the model without non-tradable sector. The results state that, the capital stock has important effects in improving the NOEM models performance, but the effects of having the non-tradable sector are small. In Chapter 3, What determines the pound-euro real exchange rate fluctuations? I study the nature of the shocks that drive the pound-euro real exchange rate movements. Theoretically, if the real shocks dominate monetary shocks in variance decomposition of real exchange rates, then it could inform policy makers that a flexible exchange rate regime is preferable to a fixed exchange rate regime. Therefore, a decomposition of the pound-euro real exchange rate fluctuations is an important criterion on the issue whether the U.K. should join the Euro area. The result shows that real shocks are the predominant deliver of both nominal and real exchange rate volatilities for the U.K.-Euro area. This supports the argument that the U.K. should not join the Euro area. In Chapter 4, The welfare effects of various exchange rate regimes in a three-country New Open Economy Macroeconomics model, I compare the welfare effects of the mon- etary and technology shocks under floating exchange rate regime, fixed exchange rate regime, basket peg regime and currency union in a three-country NOEM model. The results show that the welfare depends not only upon the choice of exchange rate regime but also upon the nature of shocks. The three-country framework is superior to the tra- ditional two-country framework as the welfare effects of the shocks in the third country play an important role in the comparison of various exchange rate regimes. With only two-country framework, the effects of the third country cannot be exhibited, and the results might be incomplete.

More information

Identifiers

Catalogue record

Export record

ASCII CitationAtomBibTeXData Cite XMLDublin CoreDublin CoreEP3 XMLEndNoteHTML CitationHTML CitationHTML ListJSONMETSMODSMPEG-21 DIDLOpenURL ContextObjectOpenURL ContextObject in SpanRDF+N-TriplesRDF+N3RDF+XMLRIOXX2 XMLReferReference ManagerSimple Metadata