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Liquidity and real activity in a simple open economy model

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  • Don E. Schlagenhauf
  • Jeffrey M. Wrase

Abstract

We examine nominal and real exchange rates, interest rates, prices, and evolutions of real variables in a two-country, monetary general-equilibrium model that includes a financial sector and shocks to technologies and money growth rates. Qualitative properties of the model are provided and moment predictions from a calibrated version of the model are compared to moments of time series drawn from actual economies. We focus on international monetary shock transmissions, and effects of monetary innovations on nominal and real exchange rates and nominal interest rates.

Suggested Citation

  • Don E. Schlagenhauf & Jeffrey M. Wrase, 1992. "Liquidity and real activity in a simple open economy model," Discussion Paper / Institute for Empirical Macroeconomics 57, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmem:57
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    References listed on IDEAS

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    Keywords

    Business cycles; Liquidity (Economics);

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