budget constraints are described by

budget constraints are described by (18) and (19): Nominal expenditures on private and government
consumption and on home-currency denominated bonds must equal nominal income
from goods sales plus pay-offs derived from maturing bonds acquired in the previous period.
(20) and (21) represent the goods market clearing conditions. As prices are flexible in the long
run and all producers face the same marginal production costs, we do not have to distinguish
between PCP and PTM goods markets. Equations (22) and (23) are the Euler equations,
describing the optimal path of consumption growth in both countries. Finally, (24) and (25)
represent the labor markets, which combine the households’ optimal labor supply decision and
the firms’ pricing rule, i.e. the optimal price as a markup over wages.
Since the model we consider is non-linear we have to recur to a method of linearization
before proceeding. As it is standard in the NOEM literature we log-linearize the model around
the steady state.11 From now on, let the percentage deviation12 of a variable x from its steady
state value ¯x be defined as ˜x = dx
¯x . As we assume zero bond holdings and no government
expenditure in the initial steady state, the respective deviation of these variables will be related
to steady state domestic consumption ¯c.

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kendala anggaran yang digambarkan oleh (18) dan (19): Nominal pengeluaran pada swasta dan pemerintahkonsumsi dan rumah-mata mata Obligasi harus sama dengan nominal pendapatandari penjualan barang ditambah membayar-off berasal dari jatuh tempo obligasi yang diperoleh pada periode sebelumnya.(20) dan (21) mewakili pasar barang kliring kondisi. Karena harga fleksibel dalam panjangRun dan semua produsen menghadapi biaya marjinal produksi yang sama, kita tidak harus membedakanantara pasar barang PCP dan PTM. Persamaan (22) dan (23) adalah persamaan Euler,menggambarkan jalan yang optimal dari pertumbuhan konsumsi di kedua negara. Akhirnya, (24) dan (25)mewakili pasar tenaga kerja, yang menggabungkan rumah tangga tenaga kerja optimal pasokan keputusan danHarga perusahaan aturan, yaitu harga sebuah markup atas upah yang optimal.Karena model kita mempertimbangkan non-linear kita harus kambuh ke metode linearizationsebelum melanjutkan. Karena standar dalam literatur NOEM kami log-linearize model di sekitarstate.11 stabil sekarang biarkan deviation12 persentase x variabel dari yang mantapnegara nilai ¯x didefinisikan sebagai ˜x = dx¯x. Ketika kita menganggap holdings Obligasi nol dan tidak ada pemerintahpengeluaran di awal kesetimbangan, penyimpangan masing-masing variabel ini akan terkaituntuk ¯c konsumsi domestik mapan.