Consider a two-period, small open economy with endowments on tradable and nontradable goods. The representative household has lifetime utility U(C,Cy,Cr2,Cv2)= log C, + log C + b log C, + b log Cy2 Endowments are Qv = Qv2 = 5 and Q, = 2.5, Q,2 = 7.5. Initial NFA is zero. The world interest rate is r' = 0.04 and the discount factor is b = 1/1.04= 0.9615. a. Compute equilibrium consumption of both goods, the trade balance, and the real exchange rate in both periods.

Consider a two-period, small open economy with endowments on tradable and nontradable goods. The representative household has lifetime utility U(C,Cy,Cr2,Cv2)= log C, + log C + b log C, + b log Cy2 Endowments are Qv = Qv2 = 5 and Q, = 2.5, Q,2 = 7.5. Initial NFA is zero. The world interest rate is r' = 0.04 and the discount factor is b = 1/1.04= 0.9615. a. Compute equilibrium consumption of both goods, the trade balance, and the real exchange rate in both periods.

Linear Algebra: A Modern Introduction

4th Edition

ISBN:9781285463247

Author:David Poole

Publisher:David Poole

Chapter7: Distance And Approximation

Section7.3: Least Squares Approximation

Problem 35EQ

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