UNEMPLOYMENT, SLOWLY DECLINING WAGES, AND DEPRESSED INVESTMENTS: DOES IT HELP TO DEVALUE?

@inproceedings{Risager1989UNEMPLOYMENTSD,
  title={UNEMPLOYMENT, SLOWLY DECLINING WAGES, AND DEPRESSED INVESTMENTS: DOES IT HELP TO DEVALUE?},
  author={Ole Risager},
  year={1989}
}
We consider an intertemporal small open economy with unemployment and depressed investments due to a high real wage. As the required wage adjustment takes time, we investigate whether a devaluation easens the adjustment process. Concerning employment, we find that it is possible to achieve a high level in the entire adjustment process, assuming that the adjustment is non-cyclical. In the cyclical case, the cumulative employment effect per unit of capital is positive. In any case, the employment… CONTINUE READING

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