Exchange Rate Pass-Through and Unemployment Dynamics

Chak Hung J. Cheng

Abstract


This paper develops a small open economy model with nominal rigidities and search-matching frictions to study the implications of incomplete exchange rate pass-through for unemployment dynamics. The model shows that incomplete exchange rate pass-through to the prices of imported goods has a larger impact on unemployment movements than does incomplete pass-through to the prices of imported inputs. Also, the effect of delayed exchange rate pass-through on unemployment dynamics depends critically on the nature of the shock that disturbs the economy.

Keywords


exchange rate pass-through; unemployment; search and matching frictions

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DOI: http://dx.doi.org/10.18533/ijbsr.v3i8.284

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International journal of business and social research (Print)
ISSN 2164-2540

International journal of business and social research (Online)
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[International Journal of Business and Social Research (IJBSR) previously published by MIR Center for Socio-Economic Research, MD, USA. From February 2018 this journal is published by the LAR Center Press, OR, USA]