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We study the gains from increased wage flexibility and their dependence on exchange rate policy, using a small open economy model with staggered price and wage setting. Two results stand out: (i) the impact of wage adjustments on employment is smaller the more the central bank seeks to stabilize...
Persistent link: https://www.econbiz.de/10011083937
Bulgaria, like other socialist economies in transition, is attempting to implement an ambitious programme which combines a price reform to reduce price distortions and to liberalize pricing mechanisms, with macroeconomic stabilization to reduce the budget deficit and lower the underlying rate of...
Persistent link: https://www.econbiz.de/10005497844
A common feature for developing countries that have experienced a sharp drop in inflation without large output losses is the extensive use of capital controls. This study shows that capital controls significantly improve the sacrifice ratio. This element contributes to the explanation of small...
Persistent link: https://www.econbiz.de/10005123647
How should monetary policy respond to changes in financial conditions? In this paper we consider a simple model where firms are subject to idyosincratic shocks which may force them to default on their debt. Firms' assets and liabilities are denominated in nominal terms and predetermined when...
Persistent link: https://www.econbiz.de/10004976783
This paper discusses three aspects of stabilization and international integration: the real wage; inflation; and the real effective exchange rate. Using empirical evidence on inflation and the real effective exchange rate, we evaluate the gradualist option represented by the Hungarian reforms....
Persistent link: https://www.econbiz.de/10005123546
The paper analyses, along the transition path and in steady state, the optimal stabilization policy in an economy in which growth is driven by learning by doing. If future benefits of learning by doing are not fully internalized by workers the optimal fiscal policy is to tax labour during...
Persistent link: https://www.econbiz.de/10005124106
OECD countries, as in previous studies, and one to a sample of developing countries, using recent World Bank data. We find … predictor of non-monotonic effects. Using the World Bank data, the situations in which the non-monotonic response of national …
Persistent link: https://www.econbiz.de/10005124252
Trade links imply that business cycle fluctuations are transmitted to trade partners. To the extent that fiscal policy can mitigate business cycle fluctuations this implies that there are international interdependencies in stabilization policies. We analyse the role of fiscal policy in...
Persistent link: https://www.econbiz.de/10005124478
-region than in the C-region. If world interest rates fall, investment accelerates in the K-region but not in the C-region. We use …
Persistent link: https://www.econbiz.de/10005497813
the monetary stability objective, and supply-side fiscal policy to the unemployment objective. In a second-best world … and world interest rate shocks do not occur. Alternatively, they are optimal if monetary stability carries no weight in …
Persistent link: https://www.econbiz.de/10005497917