Technology Shocks and Employment in Open Economies

Juha Tervala ()

No 2007-40, Economics Discussion Papers from Kiel Institute for the World Economy

Abstract: A growing body of empirical evidence suggests that a positive technology shock leads to a temporary decline in employment. A two-country model is used to demonstrate that the open economy dimension can enhance the ability of sticky price models to account for the evidence. The reasoning is as follows. An improvement in technology appreciates the nominal exchange rate. Under producer-currency pricing, the exchange rate appreciation shifts global demand toward foreign goods away from domestic goods. This causes a temporary decline in domestic employment. If the expenditure-switching effect is sufficiently strong, a technology shock also has a negative effect on output in the short run.

Keywords: Open economy macroeconomics; technology shocks; employment (search for similar items in EconPapers)
JEL-codes: F41 E24 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mac
Date: 2007

Downloads: (external link)
http://www.economics-ejournal.org/economics/discussionpapers/2007-40 (application/pdf)

Related works:
Journal Article: Technology Shocks and Employment in Open Economies (2007)
Journal Article: Technology Shocks and Employment in Open Economies (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:zbw:ifwedp:6167

Access Statistics for this paper

More papers in Economics Discussion Papers from Kiel Institute for the World Economy
Contact information at EDIRC.
Series data maintained by ZBW - German National Library for Economics ().