Structural Shocks and Labour Market Dynamics in a Small Open-Economy

Author(s): Borda, Patrice (2007)

Created 01 Jan, 2007
Categories Working Papers
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The aim of this paper is to measure the persistence of shocks on unemployment in a small open economy and the eventual links that might exist between them. Following Blanchard and Summers (1986), we consider a rational expectations’ model. Labour markets are supposed to be controlled by insider trade unions. We examine the link between structural shocks, exchange rate regime, labour market variables and exchange rate regime by theoretically and numerically solving a dynamic stochastic model. We perform parameterization and simulation for Barbados and OECS countries.

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