We analyze how the pass-through from exchange rate to domestic wages depends on the degree of integration between … domestic wages to real exchange rate is 0.1 after a year for countries with high barriers to external labor mobility, but about …

return. In the short run, an adverse shock to a region results in a sharp drop in employment and a gradual decline of … physical capital; the system returns to its initial capital/labor ratio after four years. The sharp drop in employment is … consistent with the view that wages are rigid. The analysis of adjustment in the short run relies on a vector autoregression …