Reviving the Salter-Swan small open economy model

• 成果类型: Article
• 署名作者: Schmitt-Grohe, Stephanie; Uribe, Martin
• 署名单位: Columbia University; Centre for Economic Policy Research - UK; National Bureau of Economic Research
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2021.103441
• 发表日期: 2021
• 关键词: Internal balance; External balance; Small open economy; Salter Swan diagram; Exchange rate policy; fiscal policy; Nontradable goods

摘要

This paper provides microfoundations to the Salter-Swan policy framework, a graphical apparatus designed to ascertain the exchange-rate and fiscal stance of a policymaker with internal and external economic targets. The environment is an infinite-horizon small open economy producing tradable and nontradable goods that takes world prices and world interest rates as given and is populated by optimizing households and firms. The economy is subject to terms of trade, interest rate, and discount factor shocks. The internal target of the government is the unemployment rate and the external target is the current account. Downward nominal wage rigidity and financial frictions serve as the rationale for meaningful policy intervention. (c) 2021 Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).