The Aggregate Effects of Sectoral Shocks in an Open Economy
Philippe Andrade,
Martin Arazi,
Viacheslav Sheremirov
Abstract:We study the aggregate effects of sectoral productivity shocks in a multisectoral New Keynesian open-economy model that allows for asymmetric input-output linkages, both within and between countries, as well as for heterogeneity in sectoral Calvo-type price stickiness. Asymmetries in the international production network play a key role in the model's ability to produce large domestic effects of foreign sectoral supply shocks and large differential effects of domestic shocks and global shocks. Larger trade open… Show more
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