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Discussion Paper Details

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Title: Theory and Policy of Adjustment in an Open Economy

Author(s): J Peter Neary

Publication Date: April 1985

Keyword(s): Adjustment, International Trade Theory, Long Run, Short Run and Structural Change

Programme Area(s): International Trade and Regional Economics

Abstract: This paper presents a non-technical introduction to the analysis of how an open economy adjusts to exogenous shocks. Three alternative models of adjustment are considered, each one appropriate to a different time horizon: the specific-factors model with transitional unemployment for the short run; the Heckscher-Ohlin model with temporary capital specificity for the medium run; and a new model of growth and structural change for the long run. Consideration is also given to the choice of policies towards the adjustment process, from both a welfare economic and a political economy perspective.

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Bibliographic Reference

Neary, J. 1985. 'Theory and Policy of Adjustment in an Open Economy'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=61