International Asymmetry in Business Activity and Appreciation of a Stagnant Country's Currency

20 Pages Posted: 8 May 2006

See all articles by Yoshiyasu Ono

Yoshiyasu Ono

Osaka University - Institute of Social and Economic Research (ISER)

Abstract

This paper develops a two-country, two-commodity continuous-time dynamic optimization model that accommodates a liquidity trap and persistent unemployment. It investigates a theoretical possibility of international asymmetry in business activity and a stagnant country's currency appreciation, which has been the common experience of Japan and the USA after Japan's total capital liberalization. It is found that if the marginal utility of consumption relative to that of liquidity exogenously declines in a country, its current account improves and the home currency appreciates. Consequently, home products lose competitiveness, causing home employment to decrease and foreign employment to increase.

Suggested Citation

Ono, Yoshiyasu, International Asymmetry in Business Activity and Appreciation of a Stagnant Country's Currency. Japanese Economic Review, Vol. 57, No. 1, pp. 101-120, March 2006. Available at SSRN: https://ssrn.com/abstract=886605 or http://dx.doi.org/10.1111/j.1468-5876.2006.00312.x

Yoshiyasu Ono (Contact Author)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

Register to save articles to
your library

Register

Paper statistics

Downloads
20
Abstract Views
314
PlumX Metrics