This paper presents a model of a small open economy that allows for international labor mobility, thereby endogenizing migrant transfers or remittances. The resulting model is calibrated to the Philippine economy, of which labor migration and remittance inflows are key forces that drive the economy’s growth. The model’s impulse response functions illustrate that the presence of these features generates a different set of dynamics from the standard small open economy model (without labor mobility). Depending on the source of the shock, labor mobility and remittances can either exacerbate or cushion the impact of the shock on the economy. A temporary and unanticipated rise in the world interest rate leads to a drop in aggregate output in the environment with labor mobility compared to one without. In contrast, an adverse terms-of-trade shock of the same nature affects output less severely in the case with labor mobility. Finally, a welfare cost comparison of different monetary regimes reveals that policies fostering flexible exchange rates bring about welfare gains relative to a baseline policy of inflation targeting that places a small weight on fixing the nominal exchange rate (otherwise known as hybrid flexible inflation targeting). In particular, pegging the monetary aggregate proves to be welfare-superior to six other simple rules, namely: non-traded price inflation, price-level, strict inflation, hybrid flexible inflation, exchange-rate, and export-price targeting (of which the ranking follows the order of enumeration). The ranking is preserved when labor mobility and remittances are absent in the model.

https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1230&context=etd_coll

Monetary Policies in a Small Open Economy Model with Labor Mobility and Remittances

In this paper, the authors develop and estimate a small open economy dynamic stochastic general equilibrium (DSGE) model with an enriched micro-founded specification to account for foreign remittances, an important source that helps bridge the trade gap in many developing and emerging market economies.,Although the authors’ specification provides a general frame for the analysis of the role of workers' remittances, they motivate and calibrate the model with specific focus on Pakistan, where most of the trade deficit is met through the remittance channel.,The results indicate that a negative shock to workers' remittances hampers real growth via decreased consumption and imported investment goods, while it builds pressure on exchange rate and hence worsens current account balance. These results indicate that too much dependence on workers' remittances to help meet foreign exchange deficits may potentially leave the economy in doldrums in case sizable negative shocks occur to the flow of foreign remittances.,The authors develop and estimate a small open economy DSGE model with an enriched micro-founded specification to account for foreign remittances, an important source that helps bridge the trade gap in many developing and emerging market economies.

/pdf/a-small-open-economy-dsge-model-with-workers-remittances-3a6pxz6dno.pdf

A small open economy DSGE model with workers' remittances

This paper develops a small open economy model with remittances. The model features short-run nominal price rigidity generated by monopolistic competition and staggered re-optimization in output and import markets. The model structure is closely related to similar models described in Svensson (2000), Gali and Monacelli (2002) and Monacelli (2005). This paper expands their model by introducing remittances. We find that this approach is closer to the Armenian economy because remittances have shaped main streams of economic developments during recent years. This paper explores desirable monetary policy rules for a small open transition economy like Armenia, with high degree of dolarisation and huge remittances from abroad.

/pdf/a-small-open-economy-model-with-remittances-evidence-from-ynbncu4pv9.pdf

A small open economy model with remittances: Evidence from Armenian economy

STEPANYAN A., TEVOSYAN A.: A small open economy model with remittances: evidence from Armenian economy. - EERC, 2008.

Handle everyday research tasks with reliable, citation-backed results

Your personal Research Agent to handle research tasks with citation-backed results

Popular Tasks used by Researchers

How can I help with your research?

Meet SciSpace

Get more enhanced response by uploading the PDFs you want me to reference.

No relevant PDFs in your library

SciSpace is the AI research assistant for academics. Run systematic literature reviews on 280M+ papers, and write papers with cited sources. Trusted by 1M+ students, PhDs & researchers.

SciSpace | AI for Research

Analyze PDFs

Code & Manuscripts

Funding & Grants

Literature & Patents

Medical & Clinical Data

Systematic Review

Visualize & Present

Web & Data

Build a Google Scholar-like website for your research.

Build a website

Create charts and images for your research

Create a Chart

Write a paper for submission to a journal

Draft a manuscript

Patent Search

Design eye-catching scientific posters in minutes.

Scientific Poster Generation

Systematic Literature Review

One task is running at the moment. Your messages will be shown right after.

Drag and drop or click here to browse

Loved by <highlight>1 million+</highlight> researchers

Extract a list of specific topics and their sources from unstructured text

Topics

Compare and analyze relevant papers that matches with your search

Papers

Get insights from PDFs and bookmarked papers from your library

My library

Recent searches

Try searching for:

Catch AI-generated content in scholarly and non-scholarly content

{ai} Detector

Ai Writer

Get PDF Summaries, highlighted text explanations 

Chat with PDF

Effortlessly create in-text citations and bibliographies in APA and 2,500 other formats

Citation generator

Get explanations, summaries, and answers on academic papers

Ease up your research workflow with {scispace}'s cohort of exciting AI tools

Elevate your academic writing skills and convey your ideas the way you want

Paraphraser

Explore our range of reading and writing tools

Your file is being prepared and should be ready in a few minutes. If it's a large file, it might take a bit longer. You can close this window, and we'll email you the file when it's done.

You have reached a maximum limit of <strong>{limit}</strong> columns in the table. Remove at least <strong>1</strong> column to add or create another one.

Anahit Tevosyan

Author Tools

Chat about Author

Papers

A small open economy model with remittances: Evidence from Armenian economy

STEPANYAN A., TEVOSYAN A.: A small open economy model with remittances: evidence from Armenian economy. - EERC, 2008.