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‘Dog Days’ Full Employment without Depreciation: Can It Be Done?
Author(s) -
Dixon J. M.
Publication year - 2015
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.12110
Subject(s) - economics , unemployment , boom , depreciation (economics) , labour economics , payroll , population , macroeconomics , capital formation , human capital , economic growth , demography , accounting , environmental engineering , sociology , engineering , financial capital
Garnaut, in his book Dog Days: Australia after the Boom, explores the outlook for the Australian economy as the China resources boom goes into retreat (Garnaut 2013). Modelling of this scenario was presented to the July meeting of the Melbourne Economic Forum (Dixon et al. 2014a, 2014b). We identified a smooth adjustment path to changed circumstances, which minimised the increase in unemployment and reduction in living standards, and also an alternative path of disorderly adjustment (DA), characterised by economic volatility and unemployment. The original DA scenario reported in Dixon et al. (2014a, 2014b) was predicated on inflexibility in wages and consumer behaviour. This article explores an alternative DA scenario in which the exchange rate is slow to adjust.