International Welfare Effects of Monetary Policy

Arbeitspapier

In this paper, I examine the international welfare effects of monetary policy. I develop a New Keynesian two-country model, where central banks in both countries follow the Taylor rule. I show that a decrease in the domestic interest rate, under producer currency pricing, is a beggar-thyself policy that reduces domestic welfare and increases foreign welfare in the short term, regardless of whether the cross-country substitutability is high or low. In the medium term, it is a beggar-thy-neighbour (beggar-thyself) policy, if the Marshall-Lerner condition is satisfied (violated). Under local currency pricing, a decrease in the domestic interest rate is a beggar-thy-neighbour policy in the short term, but a beggarthyself policy in the medium term. Both under producer and local currency pricing, a monetary expansion increases world welfare in the short term, but reduces it in the medium term.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Discussion paper ; No. 66

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Business Fluctuations; Cycles ; Monetary Policy ; International Finance: General ; Open Economy Macroeconomics ; International Business Cycles
• Thema: Open economy macroeconomics ; monetary policy ; beggar-thyself ; beggar-thy-neighbour ; Taylor rule ; welfare analysis

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Tervala, Juha
• Ereignis: Veröffentlichung
• (wer): Aboa Centre for Economics (ACE)
• (wo): Turku
• (wann): 2011

Weitere Informationen

• Handle: http://hdl.handle.net/10419/233282
• Letzte Aktualisierung: 10.03.2025, 11:41 MEZ