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Hysteresis in an Open Economy Model.

Abstract:

This paper explores the properties of an open economy model in which real exchange rate overshooting has a permanent impact on the rate of unemployment via a hysteresis mechanism. The magnitude of this effect depends on the slope of the short-run Phillips curve, the speed with which expectations adjust in the labour market, and on the speed with which capacity adjusts to changes in capacity utilisation. However, it does not depend on how open the economy is, although the dynamics of the adjus...

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Journal:
Scottish Journal of Political Economy More from this journal
Volume:
47
Publication date:
2000-01-01
ISSN:
0036-9292
UUID:
uuid:0b25ad11-358b-4a36-a041-c63f3079b9b6
Local pid:
oai:economics.ouls.ox.ac.uk:12880
Deposit date:
2011-08-15

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