Asia & the Pacific Policy Studies
A Factor Augmented Vector Autoregressive model is constructed in a way that it resolves the price puzzle problem and separately identifies domestic and foreign monetary policy shocks by imposing a small-open economy structure. An analysis on the employment data grouped by age and gender reveals that only the young male worker group exhibits an inverse relationship between employment and domestic policy rates. In the case of the foreign (the United States) policy rate rise, however, the negative response of employment could be observed for all of the worker groups.
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