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Macroeconomic Policy with a Floating Exchange Rate and a Unionised Non-traded Sector

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  • Dixon, Huw David

Abstract

This paper considers the effect of a unionized nontraded sector on welfare and policy in an open economy. In equilibrium, there are endogenous wage and price setting, there may be unemployment, and non-Walrasian policy effects. Nominal wages and prices become pegged to the price of tradables. With direct government employment, the multiplier is unity irrespective of financing. With direct government expenditure on nontradables, the multiplier is less than unity. In both cases, an increase in government expenditure reduces welfare. Copyright 1990 by Royal Economic Society.

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  • Dixon, Huw David, 1990. "Macroeconomic Policy with a Floating Exchange Rate and a Unionised Non-traded Sector," Economic Journal, Royal Economic Society, vol. 100(400), pages 78-90, Supplemen.
    • Handle: RePEc:ecj:econjl:v:100:y:1990:i:400:p:78-90
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    Cited by:

    1. Yasuko Ishiguro, 2019. "The Effects of Macroeconomic Policy with a Disparity in Price Elasticity Between Private‐ and Public‐ Sector Demands," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(5), pages 631-648, November.
    2. Javier Coto-Martinez & Huw Dixon, "undated". "Fiscal Policy in an Imperfectly Competitive Dynamic Small Open Economy," Discussion Papers 99/19, Department of Economics, University of York.

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