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Mr. Benedikt Braumann
This paper examines the link between capital stock and unemployment persistence. An overlapping-generations model with endogenous labor supply and imperfect competition is presented. It is used to interpret the unusual persistence of unemployment in Trinidad and Tobago during the last twenty years. Although real wages are 60 percent lower today than in the mid-1980s, unemployment continues to be very high. The paper argues that an important part of the explanation lies in the decline of capital stock in this country after years of very low savings and investment. Policies to address this capital shortage are discussed.
Mr. Benedikt Braumann

This paper examines the link between capital stock and unemployment persistence. An overlapping-generations model with endogenous labor supply and imperfect competition is presented. It is used to interpret the unusual persistence of unemployment in Trinidad and Tobago during the last twenty years. Although real wages are 60 percent lower today than in the mid-1980s, unemployment continues to be very high. The paper argues that an important part of the explanation lies in the decline of capital stock in this country after years of very low savings and investment. Policies to address this capital shortage are discussed.

Mr. Alun H. Thomas and Mr. Eswar S Prasad
This paper provides a quantitative assessment of the relative importance of different labor market adjustment mechanisms in Canada and the United States and also examines the effects of the unemployment insurance (UI) system on labor market adjustment. At the aggregate level, employment growth shocks result in similar unemployment rate responses but smaller wage responses in Canada relative to the United States. Although overall UI generosity has increased aggregate unemployment persistence in Canada, the endogenous component of UI has affected unemployment persistence only marginally. The lower degree of aggregate real wage flexibility in Canada has not been an important determinant of unemployment persistence.
Mr. Alun H. Thomas and Mr. Eswar S Prasad

discrepancy in unemployment persistence across the two countries in recent years. In addition, we do not find much evidence that the endogenous component of the UI system has had a significant influence on unemployment persistence in Canada. The remainder of the paper is organized as follows. The next section describes the dataset and the following section describes the econometric methodology. Section 4 presents the main results of the paper. Section 5 summarizes our main findings, discusses their implications, and suggests avenues for further research. II. D

Mr. Amadou N Sy and Luis Rivera-Batiz
Currency boards operate differently from standard pegs. The former exhibit greater currency stability and lower transaction costs, inflation, and nominal interest rates, but are limited in their use of devaluation. We extend Drazen and Masson’s (1994) signaling model to consider the choice between currency board arrangements and standard pegs. The model shows that currency boards’ effectiveness hinges on their credibility properties and that they can improve welfare even with high unemployment persistence. By reducing expected inflation and the negative employment effect arising from expected but unrealized inflation, currency boards can produce less unemployment than peg regimes that abstain from devaluation.
Mr. Amadou N Sy and Luis Rivera-Batiz

that the weak and the tough types choose a currency board in period 1. Similar equations apply to P ( D 2 |F 1 ,P ) and P ( D 2 | D 1 , P ). V. C urrency R egime C hoice Oliva, Rivera-Batiz and Sy [1999] examine the mathematical details of the currency board versus standard peg model. Figure 8 illustrates the choice of currency regime as a function of the unemployment persistence parameter δ. The figure compares the value of the expected loss function Ε (Λ) for a currency board and a peg regime for different magnitudes of the unemployment