Working Papers
Working Papers
Lin, Yo-Long, "Escaping Inflation in an Open Economy."
[Abstract] How did an expansive monetary policy in one country, say the United States, spread high inflation to other countries during 1960s–80s? Two perspectives are candidate answers to this question. One is from Sargent (1999), who asserts that monetary authority’s attempts to exploit a misspecified trade-off Phillips curve will yield an inefficiently high inflation. The other is from Rogoff (1985), who claims that international coordinated policy between central banks may worsen inflationary outcomes. In this context, the present paper refines the concept of learning dynamics within an open economy environment and combines the above intuitions to investigate how the international monetary policy interaction affected the transmission of inflation across countries during and after the Bretton Woods era. This article demonstrates that a sudden policy shift can make monetary authorities come to realize there exists an expectations-augmented Phillips curve embodying a version of the natural rate hypothesis. Moreover, the real-time simulations elucidate why the inflation path rose again after the collapse of the Bretton Woods system and then decreased to a lower and efficient (Ramsey) level in the middle of 1980s.
Lin, Yo-Long, "International Labor Mobility, Minimum Wage, and Economic Fluctuations." (Grant: NSC 102-2410-H-260-005)
[Abstract] The theoretical paper incorporates recursive dynamic approach within a three-technological-capability economy to investigate the impacts of international labor mobility on economic fluctuations and the minimum wages in three economies. The framework highlights the interpretations provided by the mechanism are adequate us to realize how high- and low-skilled labors moves from one country to the other in terms of their rational expectation choices. The model also serves as a bridge between wage and employment dynamics and the real world, and derives some requirement conditions where high- and low-skilled labor migrate from one country to the other, which provides some policy insights by the model.
Lin, Yo-Long, "Biased Growth and Biased Inflation: Growth Type and Time Inconsistent Policy." (Grant: MOST 103-2410-H-260-002)
[Abstract] This article provides an insight to inspect the optimal time-inconsistent monetary policy under the export-biased growth type and import-biased growth type economy, based on the New Keynesian framework. Fluctuations arisen from the design different growth types may affect one country’s welfare in terms of its terms of trade or output gap; however, literature neglects that the variation in terms of trade will yield inflation bias in both countries as well. This study derives the conditions for determinacy of the coordination environment, and finds the optimal commitment inflation policy under the coordination scenario and the associated MSV RE solutions. We show that, the inflation under the coordination will response to the current and the past output gap, not to a cost shock. That is, the optimal commitment inflation policy under coordination environment will yield an inflation bias, rather a stabilization bias.
Lin, Yo-Long, "Flexible Exchange Rate, Currency Substitution, and the Learning Dynamics."