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A NOTE ON THE VOLATILITY OF THE TRADEABLE AND NONTRADEABLE SECTORS

Published online by Cambridge University Press:  19 March 2012

Laura Povoledo
Laura Povoledo*
Affiliation:
University of the West of England
*
Address correspondence to: Laura Povoledo, Coldharbour Lane, Bristol BS16 1QY, UK; e-mail: [email protected].
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Abstract

This note evaluates whether a New Open Economy model can reproduce qualitatively the observed fluctuations of the tradeable and nontradeable sectors of the U.S. 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.

Keywords

New Open Economy MacroeconomicsTradeable and Nontradeable SectorsBusiness Cycles
Type
Notes
Information
Macroeconomic Dynamics , Volume 17 , Issue 5 , July 2013 , pp. 1158 - 1168
Copyright
Copyright © Cambridge University Press 2012 

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