SONOMA: A Small Open ecoNOmy for MAcrofinance

61 Pages Posted: 29 Nov 2018 Last revised: 15 Jun 2020

See all articles by Mariano (Max) Massimiliano Croce

Mariano (Max) Massimiliano Croce

Finance Department, Bocconi University; Centre for Economic Policy Research (CEPR)

Mohammad R. Jahan-Parvar

Board of Governors of the Federal Reserve System

Samuel Rosen

Temple University, Fox School of Business

Date Written: November 18, 2018

Abstract

We develop a small open production economy model in which external debt, corporate domestic debt, and risky equities coexist. Our economy features shocks to short- and long-run productivity, as well as shocks to both domestic credit conditions and global credit markets. We show that credit shocks are an important determinant of economic fluctuations in a model consistent with asset pricing facts. According to a novel empirical investigation from many small-but-developed countries, our setting features a powerful quantitative performance well-suited for future monetary and fiscal policy analysis.

Keywords: Small Open Economy, Credit Shocks, Asset Pricing

JEL Classification: F3, F4, G15

Suggested Citation

Croce, Mariano Massimiliano and Jahan-Parvar, Mohammad R. and Rosen, Samuel, SONOMA: A Small Open ecoNOmy for MAcrofinance (November 18, 2018). Available at SSRN: https://ssrn.com/abstract=3288963 or http://dx.doi.org/10.2139/ssrn.3288963

Mariano Massimiliano Croce

Finance Department, Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

HOME PAGE: http://sites.google.com/view/mmcroce/home

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Mohammad R. Jahan-Parvar

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://sites.google.com/site/mrjahan/

Samuel Rosen (Contact Author)

Temple University, Fox School of Business ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States

HOME PAGE: http://sites.google.com/view/samuel-rosen/

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