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External shocks

By J. P. Neary

Abstract

This paper examines the responsiveness of real income and the balance of payments to external shocks in a small open economy. It is shown that tariff restrictions and wage rigidities tend to increase responsiveness and quota restrictions tend to reduce it. The implications for policy response are considered and a micro-theoretic foundation for the distinction between expenditure-reducing and expenditure-switching policies is provided

Topics: HB Economic Theory, HD Industries. Land use. Labor
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 1994
OAI identifier: oai:eprints.lse.ac.uk:20912
Provided by: LSE Research Online
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