TY  - JOUR
AU  - Stockman,Alan C.
AU  - Koh,Ai Tee
TI  - Open-Economy Implications of Two Models of Business Fluctuations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1317
PY  - 1984
Y2  - March 1984
UR  - http://www.nber.org/papers/w1317
L1  - http://www.nber.org/papers/w1317.pdf
N1  - Author contact info:
Alan C. Stockman
Department of Economics
University of Rochester
Rochester, NY  14627-0156
Tel: 585/275-7214
Fax: 585/256-2309
E-Mail: N/A user is deceased
AB  - This paper shows how open-economy implications of alternative business-cycle models can be used to discriminate between those models. Open-economy versions of two well-known models are presented: a model with predetermined nominal wages and a model in which nominal disturbances are misperceived as real disturbances. In the former model applied to a small economy with flexible exchange rates, an unanticipated increase in the money supply increases output of both traded and nontraded goods, lowers the relative price of nontraded goods, and inducesa current-account surplus. In the latter model, an unperceived increase in the money supply increases output of nontraded goods but reduces output of traded goods, raises the relative price of nontraded goods, and induces a current-account deficit.
ER  -