Open Economies Review

, Volume 22, Issue 4, pp 613–633 | Cite as

Imperfect Intersectoral Labor Mobility and Monetary Shocks in a Small Open Economy

  • Juan Antonio Garcia-Cebro
  • Ramon Varela-Santamaria
Research Article


In this paper, we model the assumption of imperfect labor mobility across sectors in the New Open-Economy Macroeconomics framework to assess its impact on output, inflation, and welfare. Following a permanent home monetary expansion in a small open economy, we find that the above-mentioned assumption leads to: (i) less expansionary effects on (traded) output in the short term, although also less contractionary in the long term; (ii) lower short-term inflation but higher in the long term; and (iii) less intertemporal welfare, with even a ‘beggar thyself’ problem being possible.


Intersectoral labor mobility NOEM models Monetary expansion 

JEL Classification



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Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  • Juan Antonio Garcia-Cebro
    • 1
  • Ramon Varela-Santamaria
    • 1
  1. 1.Facultad de Ciencias Economicas y EmpresarialesUniversity of A CoruñaA CoruñaSpain

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