International Economic Interdependence and Exchange-rate Adjustment under Persistent Stagnation

Ono, Yoshiyasu

doi:10.1111/jere.12012

Cited by 10 publications

(7 citation statements)

References 42 publications

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“…In Table the first column summarizes the results in the asymmetric case, while columns 2 and 3 show the results in the symmetric case of secular stagnation, and that of full employment, respectively. The results in the symmetric stagnation case have been presented by Ono (), whereas those in the symmetric full‐employment case are derived from Equations and , as shown below. In the symmetric cases only the effects of the home country's parameters, α , β , b , g 1 , g 2 and θ 1 , are discussed because the effects of changes in the foreign parameters,

g_{1}^{*}

and

{italicθ}_{2}^{*} - g_{2}^{*}

, are symmetric to those of the home ones, g 2 and θ 1 − g 1 .…”

Section: Comparison With the Symmetric Casesmentioning

confidence: 99%

“…If the two countries suffer from aggregate demand stagnation, however, the result is quite different. Ono (, ) presents a two‐country dynamic model with persistent unemployment in both countries and shows that an increase in home productivity excessively improves the current account and leads the home currency, and the relative price of the home commodity, to appreciate so much that home employment and consumption decrease. The rise in the relative price of the home commodity, in turn, causes foreign employment and consumption to increase.…”

Section: Introductionmentioning

confidence: 99%

“… Ono () deals with the case where the first inequality is valid but the second one is not; that is, the case where neither country has a full‐employment steady state. …”

mentioning

confidence: 99%

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Macroeconomic Interdependence Between a Stagnant and a Fully Employed Country

Ono

2017

Jpn Econ Rev

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This paper presents a two‐country two‐commodity dynamic model where one country achieves full employment and the other suffers from secular stagnation of aggregate demand. Own and spillover effects of changes in preference, productivity and policy parameters are examined. Parameter changes that improve the stagnant country's current account, such as a reduction in government purchases, a decrease in foreign aid and an improvement in productivity, raise the relative price of the home commodity. Consequently, home employment shrinks, deflation worsens and consumption decreases. The terms of trade for the full‐employment country deteriorate. Thus, income and consumption decrease in both countries.

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g_{1}^{*}

and

{italicθ}_{2}^{*} - g_{2}^{*}

, are symmetric to those of the home ones, g 2 and θ 1 − g 1 .…”

Section: Comparison With the Symmetric Casesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Macroeconomic Interdependence Between a Stagnant and a Fully Employed Country

Ono

2017

Jpn Econ Rev

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“…Under certain conditions, a demand shortage with a liquidity trap exists. Extending this model, Ono (, ) considers the spillover effects of macroeconomic policy and trade policy on effective demand in a two‐country economy. In addition, Johdo and Hashimoto () introduce foreign direct investment into a two‐country monopolistic competition model that incorporates a stagnation mechanism and analyse the effect of corporate taxation on employment in each country.…”

Section: Introductionmentioning

confidence: 99%

Tariffs, Offshoring and Unemployment in A Two-Country Model

Hashimoto

2014

Japanese Economic Review

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This paper develops a two-country model that incorporates offshoring opportunities, and analyses the effects of tariffs under economic stagnation in a liquidity trap that causes unemployment. We find that a rise in tariffs on imports of outsourced goods contributes to an increase in employment by inducing a shift in production, but also leads to an appreciation of the real exchange rate that tends to reduce employment. The effect of real exchange rate appreciation dominates the effect of the production shift, and accordingly employment and consumption fall. The effects of tariff adjustments are reversed, however, when there is no liquidity trap and hence no unemployment. 1 See Davidson et al. (1999), Moore and Ranjan (2005) and Helpman and Itskhoki (2010) for studies on the relationship between trade liberalization and unemployment that include search frictions, but do not consider offshoring opportunities. 2A study close to ours is Hashimoto (2011), who considers offshoring in a stagnation economy and examines the effects of an exogenous change in a Leontief production technology. In this setting, however, tariff policy does not affect offshoring activity, because there is no substitution between home factors and offshoring factors.The Japanese Economic Review 6 This is a non-trivial set-up because labour costs differ between the two countries. Even if we incorporate an opportunity for offshoring by foreign firms, the implications of the model remain mostly unchanged.The Japanese Economic Review P P satisfy 9 We assume that households have access to international bonds. Enders and Mueller (2009) discuss the implications of different international asset market structures for the transmission of technology shocks.

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“…Hashimoto () examines the intergenerational redistribution effects of the public pensions system in an overlapping generations framework with the present type of stagnation. Ono (, ) extends the model into a two‐country framework and analyses the international spillover effects of fiscal spending and trade policies on each country's aggregate demand. Johdo () considers the relationship between R&D subsidies and unemployment.…”

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confidence: 99%

On Persistent Demand Shortages: A Behavioural Approach

Ono

Ishida

2013

Japanese Economic Review

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We incorporate two sets of behavioural assumptions, fairness concerns and insatiable desire for money, into a dynamic optimization model to illuminate how they can generate persistent aggregate demand shortages. We obtain the conditions for persistent unemployment and temporary unemployment. Policy implications differ significantly between the two cases. A monetary expansion raises private consumption under temporary unemployment but not under persistent unemployment. A fiscal expansion may or may not increase short‐run private consumption but crowds out long‐run consumption under temporary unemployment. Under persistent unemployment, however, a fiscal expansion always increases private consumption. The “paradoxes of toil and flexibility” also appear.

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International Economic Interdependence and Exchange-rate Adjustment under Persistent Stagnation

Cited by 10 publications

References 42 publications

Macroeconomic Interdependence Between a Stagnant and a Fully Employed Country

Macroeconomic Interdependence Between a Stagnant and a Fully Employed Country

Tariffs, Offshoring and Unemployment in A Two-Country Model

On Persistent Demand Shortages: A Behavioural Approach

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