Explaining International Comovements of Output and Asset Returns : The Role of Money and Nominal Rigidities

Author/Editor:

Robert Miguel W. K. Kollman

Publication Date:

June 1, 1999

Electronic Access:

Free Full text (PDF file size is 2458 KB).Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Empirically, output and asset returns are highly positively correlated across the United States and the other major industrialized countries. Standard business cycle models that assume flexible prices and wages, in the Real Business Cycle tradition, have great difficulties explaining this fact. This paper presents a dynamic-optimizing stochastic general equilibrium model of a two-country world with sticky nominal prices and wages and a flexible exchange rate. The structure here predicts positive international transmission of country-specific monetary policy and technology shocks, and it generates sizable cross-country correlations of output and of asset returns.

Series:

Working Paper No. 99/84

Subject:

English

Publication Date:

June 1, 1999

ISBN/ISSN:

9781451850628/1018-5941

Stock No:

WPIEA0841999

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

50

Please address any questions about this title to publications@imf.org