A Microfounded Sectoral Model for Open Economies

Abstract

Numerical simulations of the two-country sectoral model are provided for a relatively large number of structural shocks as domestic and foreign productivity shocks in final tradables and non-tradables, money demand shocks and a shock in the exchange rate. Such a model is well suited for monetary policy analysis at the international level and risk analysis.New Keynesian open economy model;tradable and non-tradable sectors;final and intermediate goods;log-linearization