Productivity shocks, exchange rate and migration: a new open economy macroeconomics approach

Wataru Johdo
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Wataru Johdo: Tokyo Keizai University, Japan

Theoretical and Applied Economics, 2025, vol. XXXII, issue 3(644), Autumn, 149-160

Abstract: This paper uses the Redux model to analyze the impact of migration on the effects of productivity shocks on consumption and the exchange rate in one country. We demonstrate that, when the elasticity of substitution between two goods is high, an increase in productivity in the home country decreases the level of consumption in that country. Conversely, if the rate of time preference is low, the relative consumption level in the home country increases due to the productivity shock. Additionally, when the rate of time preference is low, an increase in productivity causes the country's currency to appreciate.

Keywords: productivity shocks; redux model; migration; exchange rate; consumption. (search for similar items in EconPapers)
Date: 2025
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