nep-opm New Economics Papers
on Open Economy Macroeconomics
Issue of 2018‒12‒24
five papers chosen by
Martin Berka
University of Auckland

  1. Quantifying the Benefits of Labor Mobility in a Currency Union By Christopher L. House; Christian Proebsting; Linda L. Tesar
  2. The Gold Standard and the Great Depression: a Dynamic General Equilibrium Model By Luca Pensieroso; Romain Restout
  3. Repercussions of International Trade on the Market Power of Firms in Different Market Structures. By Rashid, Muhammad Mustafa
  4. International spillovers of monetary policy: evidence from France and Italy By Caccavaio, Marianna; Carpinelli, Luisa; Marinelli, Giuseppe; Schmidt, Julia
  5. Global Uncertainty, Macroeconomic Activity and Commodity Price By Shen, Yifan; Shi, Xunpeng; Zeng, Ting

  1. By: Christopher L. House; Christian Proebsting; Linda L. Tesar
    Abstract: Unemployment differentials are bigger in Europe than in the United States. Migration responds to unemployment differentials, though the response is smaller in Europe. Mundell (1961) argued that factor mobility is a precondition for a successful currency union. We use a multi-country DSGE model with cross-border migration and search frictions to quantify the benefits of increased labor mobility in Europe and compare this outcome to a case of fully flexible exchange rates. Labor mobility and flexible exchange rates both work to reduce unemployment and per capita GDP differentials across countries provided that monetary policy is sufficiently responsive to national output.
    JEL: E24 E42 E52 E58 F15 F16 F22 F33
    Date: 2018–12
  2. By: Luca Pensieroso (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Romain Restout (Université de Lorraine, Université de Strasbourg, CNRS, BETA)
    Abstract: Was the Gold Standard a major determinant of the onset and the protracted character of the the Great Depression of the 1930s in the United States and Worldwide? In this paper, we model the ‘Gold-Standard hypothesis’ in a dynamic general equilibrium framework. We show that encompassing the international and monetary dimensions of the Great Depression is important to understand what happened in the 1930s, especially outside the United States. Contrary to what is often maintained in the literature, our results suggest that the vague of successive nominal exchange rate devaluations coupled with the monetary policy implemented in the United States did not act as a relief. On the contrary, they made the Depression worse.
    Keywords: Gold Standard, Great Depression, Dynamic General Equilibrium
    JEL: N10 E13 N01
    Date: 2018–12–03
  3. By: Rashid, Muhammad Mustafa
    Abstract: The purpose of this paper is to provide an introduction of market power in different market structures and how this market power diminishes because of international trade and the effects on welfare. A review of relevant literature from Pugel (2012), McConnel Bruce and Flynn (2012) and Bernheim and Winston (2014) provides the effects of international trade on the market power conditions in different market structures and the effects on welfare. Asprilla, Berman, Cadot and Jaud (2016), Devereux and Lee (2001) and Krugman (1994) serve to provide further evidence through PTM literature, bilateral exchange rate shocks and protectionism.
    Keywords: Market Power, Market Structures, International Trade and Policy.
    JEL: E6 F01 F1 F23 F4 F41 F42 F5 M16 M2
    Date: 2018–06–19
  4. By: Caccavaio, Marianna; Carpinelli, Luisa; Marinelli, Giuseppe; Schmidt, Julia
    Abstract: In this paper we provide empirical evidence on the impact of US and UK monetary policy changes on credit supply of banks operating in Italy and France over the period 2000–2015, exploring the existence of an international bank lending channel based on the reliance on funding sources located in these two countries or denominated in their currency. We find that US monetary policy tightening leads to a reduction of lending to the domestic economy in both France and Italy, and this is mainly driven by banks that relied more intensely on USD funding markets. Conversely, we find that both French and Italian banks are isolated from UK monetary policy shocks, as most of their UK funding is denominated in Euro, despite being larger than funding from the US. JEL Classification: E51, F30, F42, G20
    Keywords: bank lending channel, foreign funding, global banks
    Date: 2018–12
  5. By: Shen, Yifan; Shi, Xunpeng; Zeng, Ting
    Abstract: We extend Jurado et al. (2015)’s forecast-error-based uncertainty measure to the international context, and construct a new measure of global uncertainty. We examine dynamic causal effects among global uncertainty and other global macroeconomic variables, and provide two important applications of our global uncertainty measure by linking it to the price formation mechanism of oil and international uncertainty spillover effects. We show that the well-documented relation between uncertainty and real activities is not only a regional issue, but also a global phenomenon. Global uncertainty also plays a key role in determining commodity prices, as well as driving business cycle fluctuations in a certain economy.
    Keywords: Global Uncertainty, International Economics, Commodity Price, Oil Price
    JEL: C32 E32 F44 O13
    Date: 2017–06–04

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