Master Thesis - Humboldt-Universität zu Berlin

Contents
1 Abstract 4
2 Introduction 4
3 Literature 7
4 The Model 9
4.1 Households . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1.1 Income, consumption and savings . . . . . . . . . . . . 10
4.1.2 Labor market: . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Intermediate firms . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3 Final goods sector . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Imported goods sector . . . . . . . . . . . . . . . . . . . . . . 14
4.5 Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.6 Balance of Payments . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Market equilibrium . . . . . . . . . . . . . . . . . . . . . . . . 18
5 Model analysis 19
5.1 Households: Optimization problem . . . . . . . . . . . . . . . 19
5.2 Intermediate firms: Optimization problem . . . . . . . . . . . 26
5.3 Importing firms: Optimization problem . . . . . . . . . . . . . 30
5.4 Final goods sector: Optimization problem . . . . . . . . . . . 31
5.5 Monetary and fiscal policy . . . . . . . . . . . . . . . . . . . . 36
6 Impulse response functions for the shocks 36
6.1 TFP shock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.2 UIRP shock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.3 Government consumption shock . . . . . . . . . . . . . . . . . 38
6.4 Monetary policy shock . . . . . . . . . . . . . . . . . . . . . . 38
6.5 Investment-specific technology shock . . . . . . . . . . . . . . 38
6.6 Consumption tax shock . . . . . . . . . . . . . . . . . . . . . . 38
6.7 Capital tax shock . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.8 Labor tax shock . . . . . . . . . . . . . . . . . . . . . . . . . 39
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