A note on the volatility of the tradeable and nontradeable sectors.
Available from: http://eprints.uwe.ac.uk/16660
- Accepted Version
Publisher's URL: http://dx.doi.org/10.1017/S1365100511000782
This note evaluates whether a "New Open Economy" model can reproduce qualitatively the observed fluctuations of the tradeable and nontradeable sectors of the US economy. The answer is positive: both in the model and in the data the standard deviations of tradeable inflation, output and employment are significantly higher than the standard deviations of the corresponding nontradeable sector variables. The key role in generating this result is played by the greater responsiveness of tradeable sector variables to monetary shocks.
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