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Does globalisation discipline monetary policymakers?

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  • Cavelaars, Paul
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    Abstract

    This paper analyses globalisation using a small general equilibrium model. It concludes that whether increased openness (a reduction in the costs of international trade) helps to discipline monetary policy in large open economies depends on the type of trade costs. Moreover, to the extent that globalisation induces stronger competition in the goods market, this may also have an adverse effect on monetary policy discipline. The latter is due to international expenditure switching, which becomes a more forceful channel as competition intensifies. Thus, the answer to the question in the title is not necessarily affirmative.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 28 (2009)
    Issue (Month): 3 (April)
    Pages: 392-405

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    Handle: RePEc:eee:jimfin:v:28:y:2009:i:3:p:392-405

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    Web page: http://www.elsevier.com/locate/inca/30443

    Related research

    Keywords: Trade costs Competition Openness Monetary policy;

    References

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    Cited by:
    1. Daniels, Joseph P & VanHoose, David D, 2010. "Exchange-Rate Pass Through, Openness, and the Sacrifice Ratio," Working Papers and Research 2010-05, Marquette University, Center for Global and Economic Studies and Department of Economics.
    2. Andrea Vaona, 2014. "The Price-Price Phillips Curve in Small Open Economies and Monetary Unions: Theory and Empirics," Kiel Working Papers 1904, Kiel Institute for the World Economy.

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