Price Mechanism and Endogenous Productivity in an Open Economy Stock-Flow Consistent Model

Research output: Contribution to journalArticlepeer-review

11 Downloads (Pure)

Abstract

This paper combines a Stock‐Flow Consistent open economy two‐country model with the Verdoorn‐Kaldor law, which posits a positive relationship between the rate of growth of output and productivity growth. The model shows the role of endogenous productivity as a shock magnifier and underlines the limits of the mechanisms of adjustment that rely exclusively on the “buffer” provided by flexible exchange rates. It also provides arguments in support of fiscal policy both in the context of flexible exchange rates and fixed exchange rates. Finally, it challenges the sustainability of austerity measures aimed to achieve external balance.
Original languageEnglish
Pages (from-to)22-56
Number of pages35
JournalMetroeconomica
Volume72
Issue number1
Early online date17 Aug 2020
DOIs
Publication statusPublished - 1 Feb 2021

Fingerprint Dive into the research topics of 'Price Mechanism and Endogenous Productivity in an Open Economy Stock-Flow Consistent Model'. Together they form a unique fingerprint.

Cite this