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Production Relocation and the Effect of Monetary Policy

Author

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  • Nishiyama, Hiroyuki

    (Kinki University)

Abstract

This paper analyzes the macroeconomic effect of production relocation by using an open economy macroeconomic model. Our analysis shows, paradoxically, that acceleration in production relocation might have an expansive effect on the home economy. We also show that monetary expansion has welfare-enhancing effects even in an economy where production relocation exists. However, advancing production relocation amplifies the effect of monetary policy on the exchange rate. On the other hand, it reduces the effect on the relative home income by advancing production relocation.

Suggested Citation

  • Nishiyama, Hiroyuki, 2005. "Production Relocation and the Effect of Monetary Policy," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 20, pages 93-108.
    • Handle: RePEc:ris:integr:0307
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    More about this item

    Keywords

    Monetary policy; Production relocation; Hollowing out; Beggarthy-neighbor;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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