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Capital mobility, tariffs, unemployment and the real exchange rate

Version 2 2024-06-03, 08:54
Version 1 2019-08-13, 14:04
journal contribution
posted on 2024-06-03, 08:54 authored by BR Hazari, Pasquale SgroPasquale Sgro
This paper examines the consequences of international capital mobility for income, unemployment and the real exchange rate in a multisectoral general equilibrium model. An important result obtained in the standard trade model is the possibility of immiserization of the host country as a consequence of foreign capital inflow. This issue is re-examined in the context of a more general model and it is established that such ‘immiserization’ depends critically on rural, urban factor intensity rankings and the income elasticities of the non-traded goods. This more general result differs from the standard theorems where ‘immiserization’ depends on the capital intensity of the imported good. This paper also highlights the importance of disaggregating the economy into regions and goods. Under certain plausible conditions it is also established that such foreign capital inflows mayraise the level of urban unemployment and that in out model Dutch Disease type movements in the real exchange rate may occur in the presence of dual labour markets.

History

Journal

International economic journal

Volume

10

Pagination

61-80

Location

Abingdon, Eng.

ISSN

1016-8737

eISSN

1743-517X

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal

Issue

3

Publisher

Taylor & Francis

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