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Abstract for:

External Shocks

J.P. Neary,  January 1994
Paper No' CEPDP0187:


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.