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Unemployment dynamics in emerging countries: Monetary policy and external shocks

Jaroslav Horvath and Jiansheng Zhong

Economic Modelling, 2019, vol. 76, issue C, 31-49

Abstract: This paper quantifies the impact of three key external shocks – external demand, interest rate, and uncertainty shocks – on emerging market economies (EMEs). We find that external shocks have a sizeable impact on macroeconomic fluctuations in EMEs and that a considerable fraction of this impact is through the domestic stock market. A decrease in external demand and an increase in external interest rate and uncertainty lead to a higher unemployment rate, lower stock market return, and a depreciation of the domestic currency. The EMEs' monetary policy actively responds to external shocks and dampens their impact on domestic activity.

Keywords: Unemployment dynamics; Monetary policy; External shocks; Emerging markets (search for similar items in EconPapers)
JEL-codes: E24 E52 F41 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.econmod.2018.07.017

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