Title: The Adjustment of an Economy Following a Productivity Shock
Abstract: Employing the two sector model of capital accumulation in an open economy, the impact on the path of the following variables: exchange rate, wages, investment, saving, and consequently external debt and capital stock after a permanent and non expected elevation of the economy productivity is determinated. After this positive shock, saving rate decreases, current transaction deteriorates and the exchange rate appreciates. Those are equilibrium phenomena from an intertemporal point of view due to the permanent income raise and to the domestic good excess demand that follows the productivity increase. Assuming that the stabilization programs augment the economy productivity, the model could rationalize qualitatively the stylized facts witnessed after those programs.
Publication Year: 2000
Publication Date: 2000-01-01
Language: en
Type: article
Indexed In: ['crossref']
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