Abstract
This paper analyzes some causes and macroeconomic consequences of J-curve effects. The Mundell-Fleming model is extended to allow for a delivery lag, exchange rate expectations, and short-run wage rigidity. It is shown that an unanticipated permanent increase in the money supply creates a J-curve effect, with the length of the J-curve depending on the degree of confusion between permanent and temporary shocks. Also, the permanent vs. temporary confusion produces persistence in the movements of real variables even if the rigidity of wages and prices is of short duration.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
