Advanced Search
MyIDEAS: Login to save this paper or follow this series

Long-run and Cyclic Movements in the Unemployment Rate in Hong Kong: A Dynamic, General Equilibrium Approach

Contents:

Author Info

  • Michael K. Salemi

    (University of North Carolina, Hong Kong Institute for Monetary Research)

Registered author(s):

    Abstract

    Prior to the late 1990s, low unemployment was a standard feature of macroeconomic life in Hong Kong. Between 1985 and 1997, the unemployment rate averaged 2.5 percent. But the picture changed dramatically thereafter with the unemployment rate rising to 6.2 percent by 1999 and remaining above 5 percent through 2005. What caused the large and sustained increase? This paper provides some answers with an analysis based on a dynamic, general equilibrium model of a small, open economy in which wage bargaining occurs. The model is calibrated using Hong Kong data for 1985 to 2005 and the calibrated model is analyzed in two ways. First, a set of comparative statics exercises investigates whether the natural rate of unemployment increased. Second, a dynamic analysis investigates whether the observed path of the unemployment rate might have been a temporary, although sustained, response to shocks. I conclude that the data favor the latter explanation.

    Download Info

    If 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.
    File URL: http://www.hkimr.org/uploads/publication/178/ub_full_0_2_161_hkimr-working-paper-no-19_bw.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 192007.

    as in new window
    Length: 40 pages
    Date of creation: 2007
    Date of revision:
    Handle: RePEc:hkm:wpaper:192007

    Contact details of provider:
    Postal: 55th Floor , Two International Finance Centre , 8 Finance Street , Central, Hong Kong
    Phone: (852)2878 1978
    Fax: (852)2878 7006
    Email:
    Web page: http://www.hkimr.org
    More information through EDIRC

    Related research

    Keywords:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. Petro Peretto, 2006. "The Employment (and Output) of Nations: Theory and Policy Implications," 2006 Meeting Papers, Society for Economic Dynamics 280, Society for Economic Dynamics.
    2. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    3. McCallum, Bennett T. & Nelson, Edward, 1999. "Nominal income targeting in an open-economy optimizing model," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 553-578, June.
    4. Christian Haefke, 2001. "Shocks and institutions in a job matching model," Economics Working Papers 568, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2001.
    5. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
    6. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
    7. Blanchard, Olivier Jean, 1991. "Wage Bargaining and Unemployment Persistence," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 23(3), pages 277-92, August.
    8. Wouter J. den Haan & Garey Ramey & Joel Watson, 1997. "Job Destruction and Propagation of Shocks," NBER Working Papers 6275, National Bureau of Economic Research, Inc.
    9. Hans Genberg & LaurentL. Pauwels, 2005. "An Open-Economy New Keynesian Phillips Curve: Evidence From Hong Kong," Pacific Economic Review, Wiley Blackwell, vol. 10(2), pages 261-277, 06.
    10. Cooley, Thomas F, 1997. "Calibrated Models," Oxford Review of Economic Policy, Oxford University Press, vol. 13(3), pages 55-69, Autumn.
    11. Salemi, Michael K, 1999. "Estimating the Natural Rate of Unemployment and Testing the Natural Rate Hypothesis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 14(1), pages 1-25, Jan.-Feb..
    12. Lindblad, Hans & Sellin, Peter, 2003. "The Equilibrium Rate of Unemployment and the Real Exchange Rate: An Unobserved Components System Approach," Working Paper Series 152, Sveriges Riksbank (Central Bank of Sweden).
    13. Hans Genberg & LaurentL. Pauwels, 2005. "Wage-Price Dynamics And Deflation In Hong Kong," Pacific Economic Review, Wiley Blackwell, vol. 10(2), pages 191-216, 06.
    14. Chang-Tai Hsieh & Keong T. Woo, 2005. "The Impact of Outsourcing to China on Hong Kong's Labor Market," American Economic Review, American Economic Association, vol. 95(5), pages 1673-1687, December.
    15. A. J. Abbott & G. De Vita, 2002. "Long-run price and income elasticities of demand for Hong Kong exports: a structural cointegrating VAR approach," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 34(8), pages 1025-1032.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:hkm:wpaper:192007. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (HKIMR).

    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.