Nominal growth in a small open economy

• Authors: Benczur P. , Konya I.
• Languages of publication: HU

Abstracts

EN

This paper develops a flexible price, two-sector nominal growth model, to study the nominal effect of capital accumulation (nominal and real convergence). The authors adopt a classical model of a small open economy with traded and non-traded goods, and enrich its structure with gradual investment and a preference for real money holdings. The modelling framework gives the following results. (1) The level of the exchange rate has a medium-run impact on nominal and real variables but no long-run effect on real variables. (2) Along the real equilibrium path of the economy, capital accumulation implies an increase of the price of non-tradables (real appreciation). (3) By comparing the nominal and the real equilibrium paths, the authors introduce a notion of misalignment. (4) The same comparison makes it possible to analyse the effect of misalignment on nominal and real variables.

Keywords

EN

GROWTH MODEL; SMALL OPEN ECONOMY MODEL

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Committee for Economic Sciences of the Hungarian Academy of Sciences
• Journal: Kozgazdasagi Szemle (Economic Review)
• Year: 2005
• Volume: 52
• Issue: 6
• Pages: 556-575
• Document type: ARTICLE

Contributors

author

Benczur P.

author

Konya I.

• P. Benczur, no address given, contact the journal editor

Identifiers

CEJSH db identifier

07HUAAAA02955985