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Yo-Long Lin

Working Papers

Recent Working Papers:

  1. Lin, Yo-Long, "Inflation Bias, Real Exchange Rate Channel, and Optimal Monetary Policy in An Open Economy."

    [Abstract] It is well-known that there are unique challenges to design optimal monetary policy in an open economy since an effort by one countryˇ¦s expansionary policy to inflate may depreciate its currency, which induces greater domestic inflation through the real exchange rate channel. Due to the above tempering influence, monetary authorities realize that lowering unemployment is more costly. To investigate the impact of any exogenous change in the natural rate of unemployment on the optimal time consistent monetary policy, we present a two-country framework to compare the minimal-state-variable rational expectations equilibria under three different scenarios: coordination, non-coordination, and leader-follower regimes. The theory demonstrates that, under coordination, an exogenous increase in one countryˇ¦s natural rate of unemployment, which may yield a greater degree of inflation bias, will induce the other country to inflate and this cross-countries effect goes through the real exchange rate channel. Moreover, under either coordination or non-coordination, the impact of the volatilities of one countryˇ¦s natural rate of unemployment on its own inflation depends on the relative strength of the effect of real exchange rate channel and the expansionary effect of unanticipated inflation surprises.
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  2. Lin, Yo-Long, Jin-Xu Lin, and Yungho Weng, "Causality between Exports and Growth in Manufacturing Industries: Evidence from Taiwan."

    [Abstract]
    Even though the relations between export expansion and output growth has been proven in Taiwanˇ¦s macroeconomic data, the causal links between exports and domestic production in Taiwanese individual manufacturing industries still need to grasp. The purpose of this paper is to investigate whether the empirical causalities in macroeconomic variables still sustain in industry-level data over the period 1982: M01ˇV2002: M07, during which Taiwan generated successful performance in both exports and economic growth. The individual-industry diagnosis shows that the causal links between exports and domestic production vary across industries, and emphasizes the implications of industry characteristics (i.e., market orientation and technological intensity) on such causal relations.The results serve as evidence that production expansion strategy can benefit low-technology export oriented industries and shrink the export sectors in most domestically-oriented industries. Moreover, median-high-technology export-oriented industries can gain benefits from export expansion strategy.
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  3. Lin, Yo-Long, "Exporting Inflation and Escape Dynamics 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 1970s-80s? Two intuitions have been used to answer this question. One is from Sargent (1999), who asserts that the government's attempts to exploit a trade-off empirical Phillips curve would yield an inefficiently high inflation. The other is from Rogoff (1985), who claims that international coordinated policy between central banks can produce an excessively high inflation. This paper aims to combine these two intuitions to investigate how the international monetary policy interaction affected the transmission of inflation across countries during and after the Bretton Woods era. Our finding reveals that sudden policy regime switching from leader-follower system to non-coordination scenario makes policymakers come to realize that there exists an expectations-augmented Phillips curve embodying a version of the natural rate hypothesis. Moreover, our simulation results can explain why inflation arose again after the collapse of Bretton Woods system then decreased to a lower level in the early 1980s.
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  4. 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.
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  5. Lin, Yo-Long, "Environmental Policy, Lobbying, and Welfare."

    [Abstract] The theoretical paper presents a two-country two-stage game framework to investigate how the determinants of environmental and trade policies influence aggregate social welfare and equilibrium quantity under the interventions of lobbying groups, where environmental taxes and tariffs are both endogenously adjusted to reflect policy considerations of the government. This paper derives the feasible conditions for environmental levy under different lobbying scenarios, and demonstrates that the potential gains to social welfare depend on the relative strength of cost competitiveness of production and the degree of pollution. Moreover, the relative changes between social welfare outcomes under different lobbying structures go through two distinct channels: the effect of quantity of aggregate outputs is significant when pollution degree is at an intermediate or a low level, while the effect of environmental tax revenue is significant when pollution becomes severe.

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Working in Progress:

  1. Lin, Yo-Long, "Exchange Rate Target Zone, Interventions, and Learning Dynamics." (Grant: NSC 100-2410-H-260-025)
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  2. Lin, Yo-Long, "Economic Growth Types and Time-inconsistent Monetary Policy." (Grant: MOST 103-2410-H-260-002)

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       Updated on 2020/08/21.

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