Welfare and Public Policy: The Role of Internationalized Production
AbstractI incorporate internationalized production, whereby firms hire domestic and foreign production factors, into the model of Corsetti and Pesenti (2001). In contrast to their conclusion, I find that an expansionary monetary shock can be beggar-thy-neighbor and a fiscal shock can improve national welfare. The transmission mechanism of public policy here is different from theirs. In particular, a fiscal shock can affect the short-run exchange rate and generate long-run welfare effects even if it is temporary. Results in this article offer another rationale for international retaliation and coordination. (JEL F30, F40) Copyright 2005, Oxford University Press.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 43 (2005)
Issue (Month): 3 (July)
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- F30 - International Economics - - International Finance - - - General
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
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- Chu, Hsiao-Lei, 2012. "Monetary policy of a small open economy in the world production chain," Economic Modelling, Elsevier, vol. 29(6), pages 2751-2755.
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