Resource title

Technology Shocks and Employment in Open Economies

Resource image

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Resource description

A growing body of empirical evidence suggests that a positive technology shock leads to a temporary decline in employment. A two-country model is used to demonstrate that the open economy dimension can enhance the ability of sticky price models to account for the evidence. The reasoning is as follows. An improvement in technology appreciates the nominal exchange rate. Under producer-currency pricing, the exchange rate appreciation shifts global demand toward foreign goods away from domestic goods. This causes a temporary decline in domestic employment. If the expenditure-switching effect is sufficiently strong, a technology shock also has a negative effect on output in the short run.

Resource author

Juha Tervala

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/18013

Resource license

Adapt according to the presented license agreement and reference the original author.