The Effects of Goods and Financial Market Integration on Macroconomic Volatility

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    Abstract

    The aim of this work is to determine whether increasing goods and financial market integration raises or lowers macroeconomic volatility. Shocks to money, government expenditure, and labour supply are analysed under different degrees of goods and financial market integration in a dynamic general equilibrium framework. Simulations show that the effects of the different shocks on economic volatility change significantly depending on the presence of incompletely integrated goods and/or financial markets. However, the results suggest that the effect of integration in one market is largely independent of the extent of integration in the other market.

    Original languageEnglish
    Pages (from-to)39-61
    Number of pages23
    JournalManchester School
    Volume66
    Publication statusPublished - 1998

    Keywords

    • PRICING-TO-MARKET
    • EXCHANGE-RATE
    • PRICES

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