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A structuralist model of the small open economy in the short, medium and long run

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  • Hoon, Hian Teck
  • Phelps, Edmund S.

Abstract

Open-economy macroeconomics contains a monetary model in the Keynesian tradition that is deemed serviceable for analyzing the short run and a nonmonetary neoclassical model thought capable of handling the long run. But do the Keynesian and neoclassical models meet the challenges thrown out by the main events of the past few decades? We first indicate that the effects of these shocks on the open economy are not well captured by either the standard Keynesian model or the standard neoclassical theory. Next we provide a careful development of a nonmonetary model of the equilibrium path of the real exchange rate, share price level, as well as natural output, employment and interest that contains trading frictions of the customer-market type. We then examine its implications for these shocks not only over the medium run but over the short run and the long run as well.
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  • Hoon, Hian Teck & Phelps, Edmund S., 2007. "A structuralist model of the small open economy in the short, medium and long run," Journal of Macroeconomics, Elsevier, vol. 29(2), pages 227-254, June.
  • Handle: RePEc:eee:jmacro:v:29:y:2007:i:2:p:227-254
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    Cited by:

    1. Hoon, Hian Teck & Phelps, Edmund S., 2007. "A structuralist model of the small open economy in the short, medium and long run," Journal of Macroeconomics, Elsevier, pages 227-254.
    2. Faria, Joao Ricardo & Leon-Ledesma, Miguel A., 2005. "Real exchange rate and employment performance in an open economy," Research in Economics, Elsevier, pages 67-80.
    3. Phelps Edmund S., 2010. "The Slump, the Recovery and the "New Normal"," Capitalism and Society, De Gruyter, vol. 5(2), pages 1-19, October.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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