Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92847
Authors: 
Ono, Yoshiyasu
Year of Publication: 
2014
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 893
Abstract: 
This paper presents a two-country two-commodity dynamic model with free international asset trade in which one country achieves full employment and the other suffers long-run unemployment. Own and spill-over effects of changes in policy, technological and preference parameters that emerge through exchange-rate adjustment are examined. Parameter changes that worsen the stagnant country's current account depreciate the home currency, expand home employment and improve the foreign terms of trade, making both countries better off. The stagnant country's foreign aid to the fully employed country also yields the same beneficial effects.
Subjects: 
long-run unemployment
fiscal expansion
current account
liquidity trap
exchange rate
JEL: 
F32
F41
F35
Document Type: 
Working Paper

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