Extending the NAWM for the import content of exports

Abstract

In this document, we set out the details for extending the New Area-Wide Model (NAWM; cf. Christoffel, Coenen and Warne, 2008) with a non-zero import content of exports. We first describe the technology used by the intermediate-good firms for producing their differentiated outputs sold abroad. We then formulate the modified market clearing conditions as well as the aggregate resource constraint for the extended model. Finally, we outline the computation of the modified steady state