Sectoral Effects of Favorable Imported-Input Price Shocks

Seung-Gwan Baek
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Seung-Gwan Baek: Hongik University

Korean Economic Review, 2003, vol. 19, 211-235

Abstract: This paper examines the extent to which a favorable external shock such as the price of an imported input affects sectoral output and employment, the real exchange rate, and the wage in an economy where the input has no domestic production at all. The analytical framework is a real, short-run model based on a three-sector, three-factor, small open economy. The effect of the shock on the variables concerned depends on the structural characterisitics of production and consumption in the economy. In the normal case, the traded sectors initially favored by the shock expand the most among sectors while the other tradables suffer.

Keywords: Imported intermediate inputs; Gross complements and substitutes; Sectoral output and employment (search for similar items in EconPapers)
JEL-codes: E2 O1 O5 (search for similar items in EconPapers)
Date: 2003
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