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Intertemporale Output- und Beschäftigungseffekte angebotsorientierter Politikmaßnahmen in einer Währungsunion / Short- and Long-run Effects of Supply Side Policies within a Currency Union

Listed author(s):
  • Wohltmann Hans-Wemer
  • Bulthaupt Frank

    (Institut für Theoretische Volkswirtschaftslehre der Christian-Albrechts-Universität zu Kiel, Wilhelm-Seelig-Platz 1, D-24118 Kiel)

The paper analyses the short-, intermediate- and long-run effects of anticipated supply side policies within a two-country model of a currency union that is characterized by perfect foresight dynamics, saddle-point stability and the incorporation of intermediate goods imports. We show that both a reduction of labor extra-costs and a revenue neutral cut in the employers’ contribution to the social security has indeterminate short-run effects resulting from an ambiguous exchange-rate jump in the announcement interval. However, the policies achieve in the long-run an unambiguous rise in aggregate output and employment. The employment increase is stronger than the output expansion due to a decline in the producers’ real wage rate and a rise in the real factor price of the intermediate goods imports. Our results display positive long-run output and employment effects as well, if the employers’ and the employees’ contributions to the social security are reduced simultaneously and the revenue loss is compensated by an under-proportional rise of the VAT-rate. Unilateral supply side policies have ambiguous spillover effects in the second member country of the union.

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Article provided by De Gruyter in its journal Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik).

Volume (Year): 218 (1999)
Issue (Month): 1-2 (February)
Pages: 1-22

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Handle: RePEc:jns:jbstat:v:218:y:1999:i:1-2:p:1-22
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