Computational Macroeconomics for the Open Economy

by Lim, G. C.; Mcnelis, Paul D.

• ISBN13: 9780262552837
• ISBN10: 0262552833
• Format: Paperback
• Copyright: 2024-08-06
• Publisher: The MIT Press

Summary

How to use nonlinear dynamic models in policy analysis.

Policymakers need quantitative as well as qualitative answers to pressing policy questions. Because of advances in computational methods, quantitative estimates are now derived from coherent nonlinear dynamic macroeconomic models embodying measures of risk and calibrated to capture specific characteristics of real-world situations. This text shows how such models can be made accessible and operational for confronting policy issues. The book starts with a simple setting based on market-clearing price flexibility. It gradually incorporates departures from the simple competitive framework in the form of price and wage stickiness, taxes, rigidities in investment, financial frictions, and habit persistence in consumption. Most chapters end with computational exercises; the Matlab code for the base model can be found in the appendix. As the models evolve, readers are encouraged to modify the codes from the first simple model to more complex extensions. Computational Macroeconomics for the Open Economy can be used by graduate students in economics and finance as well as policy-oriented researchers.

Author Biography

G. C. Lim is Professorial Research Fellow at the Melbourne Institute of Applied Economic and Social Research, University of Melbourne. She is the coauthor of Dynamic Economic Models in Discrete Time: Theory and Empirical Applications and An Introduction to Dynamic Economic Models (both with Brian Ferguson).

Paul D. McNelis is Robert Bendheim Chair of Economic and Financial Policy at Fordham University Graduate School of Business Administration. He is the author of Neural Networks in Finance: Gaining Predictive Edge in the Market.

Table of Contents

Preface xi
Acknowledgments xv
1 Introduction 1
2 A Small Open Economy Model 19
3 Sticky Domestic Prices 47
4 Income and Consumption Taxes 69
5 Current Account Dynamics 85
6 Capital and Tobin's Q 103
7 Economy with Natural Resources 121
8 Financial Frictions 139
9 Wage Rigidities 157
10 Habit Persistence 173
11 International Capital Flows and Adjustments 191
Appendixes
A Definition of Symbols 201
B Definition of Variables 203
C The Computer Algorithm 205
Notes 211
Bibliography 215
Index 225