From John Taylor to John Clare

Taylor, John; Storey, Mark

doi:10.1093/oseo/instance.00078675

Cited by 6 publications

(7 citation statements)

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“…There is considerable uncertainty regarding the true value of trade elasticities, directly related to this parameter. For instance,Taylor [1993] estimates the value for the U.S. to be 0.39, whileWhalley [1985], the study quoted byBackus et al [1995], reports a value of 1.5. For European countries most empirical studies suggest a value below 1.…”

mentioning

confidence: 99%

International Risk-Sharing and the Transmission of Productivity Shocks

Corsetti¹,

Dedola²,

Leduc³

2003

Working Paper (Federal Reserve Bank of Philadelphia)

131

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A central puzzle in international finance is that real exchange rates are volatile and, in stark contradiction to efficient risk-sharing, negatively correlated with relative consumptions across countries. This paper shows that a model with incomplete markets and a low price elasticity of imports can account for these properties of real exchange rates. The low price elasticity stems from introducing distribution services, which drive a wedge between producer and consumer prices and lowers the impact of terms-of-trade changes on optimal agents' decisions.In our model, two very different patterns of the international transmission of productivity shocks generate the observed degree of risk-sharing: one associated with an improvement, the other with a worsening of the country's terms of trade and real exchange rate. We provide VAR evidence on the effect of technology shocks to U.S. manufacturing, identified through long-run restrictions, in support of the first transmission pattern. These findings are at odds with the presumption that terms-of-trade movements foster international risk-pooling.JEL classification: F32, F33, F41

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mentioning

confidence: 99%

International Risk-Sharing and the Transmission of Productivity Shocks

Corsetti¹,

Dedola²,

Leduc³

2003

Working Paper (Federal Reserve Bank of Philadelphia)

131

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“…The claim is statistically con…rmed by Wald tests. In terms of economic policy, a coe¢ cient above one means that monetary policymakers were looking ahead trying to stabilize in ‡ation before 1994, apparently contradicting conventional wisdom in Brazil that policymakers only looked backwards 20 . Moreover, the …nding implies that an in ‡ation coe¢ cient greater than one does not necessarily characterize monetary stability.…”

Section: Megain ‡Ationary Eramentioning

confidence: 99%

“…Consequently, while the similarity of the conclusions is quite unexpected, it also makes them more reliable. Moreover, since monthly outputs have 20 Many people in Brazil believe that monetary policymakers responded only to past in ‡ation, since most contracts were indexed to it. Therefore, I have run the model setting (k; q) = (0; 0), a closer speci…cation of Rudebusch and Svensson (1999).…”

Section: Real Eramentioning

confidence: 99%

Did the Taylor Rule Stabilize Inflation in Brazil?

De-Losso

2008

SSRN Journal

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This paper characterizes the monetary policy in Brazil through a forward-looking Taylor-rule-type reaction function before and after the Real plan, which stabilized inflation in July 1994. The results show that the interest rate response to inflation was greater than one-to-one before stabilization and smaller than that afterwards, hence inverting the Taylor's principle. Several robustness checks, using mainly distinct proxies for output, output gap and data frequency strongly confirm the findings.

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“…10 There is considerable uncertainty regarding the true value of trade elasticities, directly related to this parameter. For instance, Taylor [1993] estimates the value for the U.S. to be 0.39, while Whalley [1985], in the study used by Backus et al [1995], reports a value of 1.5. For European countries most empirical studies suggest a value below 1.…”

Section: Setting the Elasticity Of Substitution Between Home And Forementioning

confidence: 99%

DSGE Models of High Exchange-Rate Volatility and Low Pass-Through

Corsetti

Dedola²,

Leduc

2005

Int. finance discuss. pap.

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This paper develops a quantitative, dynamic, open-economy model which endogenously generates high exchange rate volatility, whereas a low degree of exchange rate pass-through (ERPT) stems from both nominal rigidities (in the form of local currency pricing) and price discrimination. We model real exchange rate volatility in response to real shocks by reconsidering and extending two approaches suggested by the quantitative literature (one by Backus Kehoe and Kydland [1995], the other by Chari, Kehoe and McGrattan [2003]), within a common framework with incomplete markets and segmented domestic economies. We show that, in our framework, both approaches are successful in generating volatility without suffering from shortcomings such as a fall in import volatility, or the need for nominal shocks. Our model accounts for a variable degree of ERPT over different horizons. In the short run, we find that a very small amount of nominal rigidities-consistent with the evidence in Bils and Klenow [2004]-lowers the elasticity of import prices at border and consumer level to 27% and 13%, respectively. Still, exchange rate depreciation worsens the terms of trade-in accord with the evidence stressed by Obstfeld and Rogoff [2000]. In the long run, ERPT coefficients are also below one, as a result of price discrimination. We run a set of regressions adopted by the empirical literature on ERPT, typically plagued by omitted variable bias and measurement errors, on the time series generated by our model. The ERPT estimates are biased, but in most cases not off the mark; most regressions can detect differences between short-run and long-run ERPT. We show that the quality of empirical proxies for marginal costs and demand typically vary depending on the shocks (real vs. nominal) hitting the economy.

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From John Taylor to John Clare

Cited by 6 publications

References 0 publications

International Risk-Sharing and the Transmission of Productivity Shocks

International Risk-Sharing and the Transmission of Productivity Shocks

Did the Taylor Rule Stabilize Inflation in Brazil?

DSGE Models of High Exchange-Rate Volatility and Low Pass-Through

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