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dc.contributor.authorHeer, Burkharden_US
dc.contributor.authorSchubert, Stefan Franzen_US
dc.date.accessioned2011-06-22en_US
dc.date.accessioned2011-06-29T11:14:58Z-
dc.date.available2011-06-29T11:14:58Z-
dc.date.issued2011en_US
dc.identifier.urihttp://hdl.handle.net/10419/46295-
dc.description.abstractThe paper analyzes the dynamic effects of a total factor productivity shock and an interest rate risk premium shock in a highly indebted open economy. In contrast to the standard open economy framework, search unemployment and wage bargaining are introduced. We find that a negative total factor productivity shock primarily has effects on the economy's production side and on welfare, but not on its stock of foreign debt and the country specific risk premium, and large part of the adjustment happens in the short run. In contrast, a pure increase in the country specific risk premium causes substantial dynamics and a considerable reduction in foreign debt, allowing higher consumption in the long run and creating an intertemporal welfare gain, even though unemployment increases strongly in the short run. A 50% haircut of foreign debt significantly reduces the initial response of the unemployment rate. In case of a temporary productivity shock, sticky wages imply smaller employment, but generate higher welfare than flexible wages.en_US
dc.language.isoengen_US
dc.publisherCESifo Münchenen_US
dc.relation.ispartofseriesCESifo working paper: Trade Policy 3497en_US
dc.subject.jelF34en_US
dc.subject.jelF41en_US
dc.subject.jelJ64en_US
dc.subject.ddc330en_US
dc.subject.keywordunemploymenten_US
dc.subject.keyworddebten_US
dc.subject.keywordinterest rate premiumen_US
dc.subject.keywordhaircuten_US
dc.subject.keywordsticky wagesen_US
dc.titleUnemployment and debt dynamics in a highly indebted small open economyen_US
dc.typeWorking Paperen_US
dc.identifier.ppn662658973en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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