Public sector layoffs, severance pay, and inflation in the small open economy
AbstractBecause severance pay is worth 2-5 years of wages in many LDCs, public sector layoffs increase the fiscal deficit in the short run. Nevertheless, generous severance pay is not as serious a macroeconomic problem as generally thought. In the case where the fiscal deficit is financed by printing money, inflation is continuously lower under plausible conditions. When the government can borrow in world capital markets and layoffs reduce the present-value wage bill, there exists a sequence of bond sales and subsequent redemptions that guarantees continuously lower inflation. This result does not hold, however, if the reform lacks credibility.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 28 (2009)
Issue (Month): 6 (October)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30443
Severance pay Inflation Fiscal deficit;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin Uribe & Vivian Z. Yue, 2003.
"Country Spreads and Emerging Countries: Who Drives Whom?,"
NBER Working Papers
10018, National Bureau of Economic Research, Inc.
- Uribe, Martin & Yue, Vivian Z., 2006. "Country spreads and emerging countries: Who drives whom?," Journal of International Economics, Elsevier, vol. 69(1), pages 6-36, June.
- Martin Uribe & Vivian Yue, 2004. "Country spreads and emerging countries: who drives whom?," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
- Richard Cantor & Frank Packer, 1996.
"Determinants and impact of sovereign credit ratings,"
Economic Policy Review,
Federal Reserve Bank of New York, issue Oct, pages 37-53.
- Richard Cantor & Frank Packer, 1996. "Determinants and impacts of sovereign credit ratings," Research Paper 9608, Federal Reserve Bank of New York.
- Tait Davis, J., 1991. "Institutional impediments to workforce retrenchment and restructing in Ghana's State enterprises," World Development, Elsevier, vol. 19(8), pages 987-1005, August.
- Sanjeev Gupta & Henry Ma & Christian Schiller, 1999. "Privatization, Social Impact, and Social Safety Nets," IMF Working Papers 99/68, International Monetary Fund.
- Barro, Robert J., 1979.
"On the Determination of the Public Debt,"
3451400, Harvard University Department of Economics.
- Mohsin S. Khan, 1980. "Monetary Shocks and the Dynamics of Inflation (Les chocs monÃ©taires et la dynamique de l'inflation) (Los "choques" monetarios y la dinÃ¡mica de la inflaciÃ³n)," IMF Staff Papers, Palgrave Macmillan, vol. 27(2), pages 250-284, June.
- Bijan B. Aghevli & Mohsin S. Khan & P. R. Narvekar & Brock K. Short, 1979. "Monetary Policy in Selected Asian Countries (La politique monÃ©taire dans certains pays d'Asie) (La polÃtica monetaria de algunos paÃses asiÃ¡ticos seleccionados)," IMF Staff Papers, Palgrave Macmillan, vol. 26(4), pages 775-824, December.
- Rama, Martin, 1999. "Public Sector Downsizing: An Introduction," World Bank Economic Review, World Bank Group, vol. 13(1), pages 1-22, January.
- Haltiwanger, John & Singh, Manisha, 1999. "Cross-Country Evidence on Public Sector Retrenchment," World Bank Economic Review, World Bank Group, vol. 13(1), pages 23-66, January.
- Subramanian S. Sriram, 2001. "A Survey of Recent Empirical Money Demand Studies," IMF Staff Papers, Palgrave Macmillan, vol. 47(3), pages 3.
- Rama, Martin & MacIsaac, Donna, 1999. "Earnings and Welfare after Downsizing: Central Bank Employees in Ecuador," World Bank Economic Review, World Bank Group, vol. 13(1), pages 89-116, January.
- Barry Eichengreen & Ashoka Mody, 1998. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?," NBER Working Papers 6408, National Bureau of Economic Research, Inc.
- Edwards, Sebastian, 1984. "LDC Foreign Borrowing and Default Risk: An Empirical Investigation, 1976-80," American Economic Review, American Economic Association, vol. 74(4), pages 726-34, September.
- Krishna Srinivasan & Erich SpitÃ¤ller & M. Braulke & Christian B. Mulder & Hisanobu Shishido & Kenneth M. Miranda & John Dodsworth & Keon Lee, 1996. "Vietnam," IMF Occasional Papers 135, International Monetary Fund.
- Thurlow, James & Wobst, Peter, 2004. "The road to pro-poor growth in Zambia," DSGD discussion papers 16, International Food Policy Research Institute (IFPRI).
- Sebastian Edwards, 1983. "LDC's Foreign Borrowing and Default Risk: An Empirical Investigation," NBER Working Papers 1172, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.