scholarly journals A structuralist model of the small open economy in the short, medium and long run

2007 ◽  
Vol 29 (2) ◽  
pp. 227-254 ◽  
Author(s):  
Hian Teck Hoon ◽  
Edmund S. Phelps
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Long Run

The long-run stability of a small, open economy under crawling peg regime

2002 ◽  
Vol 52 (1) ◽  
pp. 57-78
Author(s):  
S. Çiftçioğlu
Keyword(s):  
Exchange Rate ◽  
Open Economy ◽  
Risk Premium ◽  
Small Open Economy ◽  
Exchange Rate Policy ◽  
Price Stability ◽  
Output Stability ◽  
Long Run ◽  
The Exchange Rate ◽  
The Impact

The paper analyses the long-run (steady-state) output and price stability of a small, open economy which adopts a “crawling-peg” type of exchange-rate regime in the presence of various kinds of random shocks. Analytical and simulation results suggest that with the exception of money demand shocks, an exchange rate policy which involves a relatively higher rate of indexation of the exchange rate to price level is likely to lead to the worsening of price stability for all types of shocks. On the other hand, the impact of adopting such a policy on output stability depends on the type of the shock; for policy shocks to the exchange rate and shocks to output demand, output stability is worsened whereas for the shocks to risk premium of domestic assets, supply price of domestic output and the wage rate, better output stability is achieved in the long run.

HABIT FORMATION AND GOVERNMENT SPENDING IN A SMALL OPEN ECONOMY

2003 ◽  
Vol 7 (3) ◽  
pp. 407-423 ◽  
Author(s):  
Cem Karayalçin
Keyword(s):  
Fiscal Policy ◽  
General Equilibrium ◽  
Current Account ◽  
Open Economy ◽  
Equilibrium Model ◽  
Government Spending ◽  
Time Preference ◽  
Small Open Economy ◽  
Long Run ◽  
Fiscal Shocks

The paper studies the effects of an expansionary fiscal policy in a general equilibrium model of a small open economy. Households are assumed to possess habit-forming, endogenous rates of time preference. In response to fiscal shocks, the model generates cyclical endogenous persistence and procyclical time paths for consumption, employment, and investment, as well as a countercyclical path for the current account. Furthermore, fiscal shocks are shown to have positive long-run effects on output and negative long-run effects on consumption.

Risk Aversion and Unemployment in an Open Economy

2000 ◽  
Vol 49 (2) ◽  
Author(s):  
Pia Weiß
Keyword(s):  
Risk Aversion ◽  
Open Economy ◽  
Small Open Economy ◽  
Risk Behaviour ◽  
Terms Of Trade ◽  
Individual Risk ◽  
Risk Averse ◽  
Search Frictions ◽  
Long Run ◽  
The Impact

AbstractThe paper analyses the impact which risk aversion has on a small open economy characterised by search frictions on the labour market. It is shown that the long-run qualitative effects caused by a terms-of-trade shock are independent of individual risk behaviour. As far as quantitative aspects are concerned risk aversion always leads to higher equilibrium employment; however the increase in unemployment due to a price shock is the higher the more risk-averse individuals are.

scholarly journals The Impacts of Temporary and Permanent Public Health Policies on HRQOL in a Small Open Economy

2021 ◽  
Vol 13 (17) ◽  
pp. 9866
Author(s):  
Yasuhiro Nakamoto ◽  
Taketo Kawagishi
Keyword(s):  
Public Health ◽  
Open Economy ◽  
Public Investment ◽  
Small Open Economy ◽  
Health Policies ◽  
Public Health Policies ◽  
Long Run ◽  
Related Quality ◽  
Health Related ◽  
The Government

Considering that people can invest in their health-related quality of life (HRQOL), we investigate the effects of public health policies (i.e., a health investment subsidy policy and the direct distribution of health-related goods) on HRQOL in a small open economy. We find that when the government makes public investment in HRQOL temporarily, HRQOL deteriorates or does not improve at least. On the contrary, when public investment is enforced permanently, it improves in the long run.

scholarly journals Unemployment rate dynamics in small open economy: The case of Serbia

Industrija ◽  
2020 ◽  
Vol 48 (4) ◽  
pp. 7-22
Author(s):  
Aleksandra Anić ◽  
Zorica Mladenović
Keyword(s):  
Unemployment Rate ◽  
Open Economy ◽  
Small Open Economy ◽  
Dynamic Modelling ◽  
Real Effective Exchange Rate ◽  
Real Wages ◽  
Vector Autoregressive ◽  
The Great Recession ◽  
Dynamic Relationship ◽  
Long Run

Dynamic relationship among unemployment rate and key macroeconomic variables is explored for the Serbian economy that has been characterized by high unemployment rates since the outcome of the Great Recession. This analysis reveals how effective policy measures can be in reducing unemployment rate. Cointegrated vector autoregressive model is employed for the period 2014-2019. Prior to multivariate dynamic modelling, the validity of hysteresis hypothesis for unemployment rate is assessed. Obtained results show significant negative long-run effect of real wages on unemployment rate, and positive long-run effect of real effective exchange rate appreciation on real wages. For further reduction of unemployment rate demand-side measures should be employed.

scholarly journals FISCAL AUSTERITY MEASURES: SPENDING CUTS VS. TAX INCREASES

2018 ◽  
Vol 22 (2) ◽  
pp. 501-540 ◽  
Author(s):  
Gerhard Glomm ◽  
Juergen Jung ◽  
Chung Tran
Keyword(s):  
Open Economy ◽  
Risk Premium ◽  
Small Open Economy ◽  
Welfare Effects ◽  
Trade Offs ◽  
Long Run ◽  
Welfare Losses ◽  
Wide Range ◽  
Short Run ◽  
Fiscal Austerity

We formulate an overlapping-generations model with household heterogeneity and productive and nonproductive government programs to study the macroeconomic and intergenerational welfare effects of risk premium shocks and government debt reductions. We demonstrate that in a small open economy with a high level of debt, a small increase in the risk premium of the interest rate leads to a substantial contraction in output and negative welfare effects. We then quantify the effects of reducing the debt-to-gross-domestic-product ratio using a wide range of fiscal austerity measures. Our results indicate trade-offs between short-run contractions and long-run expansions in aggregate output. In the short run, spending-based austerity reforms are worse than tax-based reforms in terms of lost income. However, in the long run, spending-based reforms produce higher output than tax-based reforms. In addition, welfare effects vary significantly across generations, skill groups, and working sectors. The current old and middle-aged generations experience welfare losses, whereas future generations are beneficiaries of the reforms.

ASSESSING CHINA'S RENMINBI PEG TO THE U.S. DOLLAR: THE CASE FOR GREATER RMB EXCHANGE RATE FLEXIBILITY

2012 ◽  
Vol 57 (01) ◽  
pp. 1250003 ◽  
Author(s):  
WEI SUN ◽  
LIAN AN
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Structural Var ◽  
Var Model ◽  
Unique Contribution ◽  
Asymmetric Shocks ◽  
Output Fluctuations ◽  
Long Run ◽  
Optimum Currency ◽  
The U.S

This paper assesses China's Renminbi peg to the U.S. dollar using a structural VAR model. One unique contribution of the paper is that we model China as a large open economy in one structural VAR model with the U.S. by utilizing combinations of short- and long-run identification restrictions and relax the small open economy assumption usually imposed on China. Using monthly data for the period of 1990:4 to 2007:12, we find the following. First, U.S. shocks do not explain much of the output fluctuations in China, indicating that the two economies are subject to asymmetric shocks. Optimum currency area theory suggests that more flexibility of the RMB relative to the dollar may be desirable. Second, U.S. shocks explain little of the fluctuations in China's CPI, suggesting that the benefits of importing inflation from the U.S. by pegging to the dollar are minimal, thus more flexibility in the RMB relative to the dollar is feasible. Third, U.S. shocks do not influence China's international competitiveness (REER) to a noticeable extent, suggesting that moving toward more flexibility relative to the dollar may be in China's interest.

Globalisation, Accumulation and Inequality – the Case of Germany

2007 ◽  
Vol 56 (2) ◽  
Author(s):  
Ulf von Kalckreuth ◽  
Gerhard Ziebarth
Keyword(s):  
Economic Integration ◽  
Open Economy ◽  
Small Open Economy ◽  
National Income ◽  
Structural Unemployment ◽  
Real Rate ◽  
Labour Share ◽  
Long Run ◽  
Return On Capital ◽  
Hurdle Rate

AbstractWe study the conditions under which in a small open economy the labour share in national income may retain a stable value and the significance of primary savings from labour income is maintained. We conclude that the growth of domestic product must not be lower than the real rate of return on capital weighted by the savings ratio of asset holders. For Germany, we estimate a hurdle rate of growth of about 1.5 % that must be surpassed in the long run just to prevent the labour share from falling indefinitely. The condition has not been met for a number of years, because of chronically sluggish growth and high structural unemployment. We present a dynamic model of economic integration to show that, to a large extent, this pattern is an effect of globalisation. Besides fostering innovation, reinforcing the education system should have priority.

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