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Title:Technology Shocks and Employment in Open Economies PDF Logo
Authors:Tervala, Juha
Issue Date:2007
Series/Report no.:Economics Discussion Papers / Institut für Weltwirtschaft 2007-40
Abstract: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.
Subjects:Open economy macroeconomics
technology shocks
employment
JEL:F41
E24
E32
Creative Commons License:http://creativecommons.org/licenses/by-nc/2.0/de/deed.en
Document Type:Working Paper
Appears in Collections:Economics: The Open-Access, Open-Assessment E-Journal - Discussion Papers

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