Title :
Real Exchange Rate and Current Account Dynamics with Sticky Prices and Distortionary Taxes
Author :
Lim, Guay C. ; McNelis, Paul D.
Abstract :
This paper examines the interaction of real exchange rates and current account movements in open economics subject to monopolistic competition with sticky price-setting behavior and distortionary taxes. We find that the correlations between fiscal balances and the current account depend on the elasticity of net exports with respect to the real exchange rate. Under highly elastic export demand, the welfare effects may be greater or lower than under export demand with a low elasticity
Keywords :
exchange rates; pricing; current account dynamics; distortionary taxes; monopolistic competition; real exchange rate; sticky price-setting behavior; Couplings; Econometrics; Elasticity; Electric shock; Exchange rates; Finance; Government; Productivity; Robustness; Stochastic processes; JEL Classificaltion: E52,E62,F41; current account; real exchange rate; sticky price setting;
Conference_Titel :
Neural Networks and Brain, 2005. ICNN&B '05. International Conference on
Conference_Location :
Beijing
Print_ISBN :
0-7803-9422-4
DOI :
10.1109/ICNNB.2005.1614950
