Paulina Restrepo-Echavarria

Monetary Policy in an Oil-Exporting Economy

The sudden collapse of oil prices poses a challenge to inflation-targeting central banks in oil-exporting economies. In this article, the authors illustrate this challenge and conduct a quantitative assessment of the impact of changes in oil prices in a small open economy in which oil represents an important fraction of its exports. They build a monetary, three-sector, dynamic stochastic general equilibrium model and estimate it for the Colombian economy. They model the oil sector as an optimal resource extracting problem and show that in oil-exporting economies the macroeconomic effects vary according to the degree of persistence of oil price shocks. The main channels through which these shocks pass to the economy come from the real exchange rate, the country risk premium, and sluggish price adjustments. Inflation-targeting central banks in such economies face a policy dilemma: raise the policy rate to fight increased inflation coming from the exchange rate passthrough or lower it to stimulate a slowing economy.

China’s Slowdown: Is Currency Appreciation to Blame?

Evidence suggests that the exchange rate appreciation is not to blame for Chinas slowdown.

Targeted search in matching markets

In reality matching is not purely random nor perfectly assortative. We propose a parsimonious way to model the choice of whom to meet that endogenizes the degree of randomness in matching, and show that this allows for better identification of preferences. The model features an interaction between a productive and a strategic motive. For some preference specifications, there is a tension between these two motives that drives an endogenous wedge between the shape of sorting patterns and the shape of the underlying match payoff function, allowing for better empirical identification. We show the empirical relevance of our theoretical results by applying it to the U.S. marriage market. JEL: E24, J64, C78, D83.