The Impact of Fiscal and Productivity Shocks on the Natural Rate of Unemployment in a Two-Country World
Hian Hoon and
Edmund Phelps
Chapter 5 in Open-Economy Macroeconomics, 1993, pp 95-118 from Palgrave Macmillan
Abstract:
Abstract Fitoussi and Phelps (1986; 1988) addressed the international transmission of fiscal shocks through the world real interest rate, but without explicit treatment of agents’ optimal decisions. Various other authors have examined the international aspects of fiscal policies and productivity shocks in models where agents’ intertemporal objectives and constraints are explicitly modelled.1 In those models, the world rate of interest also plays an important role in channelling the impact of various economic shocks but they all postulate full employment throughout. In this chapter, we adopt a modelling strategy where agents’ intertemporal decision problems are solved explicitly but where we use a dynamic version of the classic Salop (1979) natural rate model in describing each economy.2 We show how world interest rates adjust in response to exogenous shocks and how they affect the evolution of the equilibrium rate of unemployment.
Keywords: Interest Rate; Fiscal Policy; Real Wage; Physical Capital; Real Interest Rate (search for similar items in EconPapers)
Date: 1993
References: Add references at CitEc
Citations: View citations in EconPapers (1)
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Related works:
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: https://EconPapers.repec.org/RePEc:pal:intecp:978-1-349-12884-6_5
Ordering information: This item can be ordered from
http://www.palgrave.com/9781349128846
DOI: 10.1007/978-1-349-12884-6_5
Access Statistics for this chapter
More chapters in International Economic Association Series from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().