International spillover effects and monetary policy activism
AbstractThis paper examines how the preferences of a large economy’s central bank affect the trade-off between output and inflation volatility faced by the central bank of a small open economy by analysing the impact of a global cost-push shock. We demonstrate that under the assumption of producer currency pricing, the trade-off faced by the small open economy is likely to worsen as the foreign central bank becomes more focused on output stabilisation relative to inflation stabilisation; but the opposite is true in the case of local currency pricing.
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Bibliographic InfoPaper provided by Bank of England in its series Bank of England working papers with number 377.
Length: 27 pages
Date of creation: 27 Nov 2009
Date of revision:
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Open economy; policy trade-offs; producer versus local currency pricing;
Other versions of this item:
- Anna Lipińska & Morten Spange & Misa Tanaka, 2011. "International Spillover Effects and Monetary Policy Activism," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(8), pages 1735-1748, December.
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-05 (All new papers)
- NEP-CBA-2009-12-05 (Central Banking)
- NEP-MAC-2009-12-05 (Macroeconomics)
- NEP-MON-2009-12-05 (Monetary Economics)
- NEP-OPM-2009-12-05 (Open Economy Macroeconomics)
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- Alex Haberis & Anna Lipinska, 2012.
"International policy spillovers at the zero lower bound,"
Finance and Economics Discussion Series
2012-23, Board of Governors of the Federal Reserve System (U.S.).
- Haberis, Alex & Lipińska, Anna, 2012. "International policy spillovers at the zero lower bound," Bank of England working papers 464, Bank of England.
- Lipińska, Anna & von Thadden, Leopold, 2009. "Monetary and fiscal policy aspects of indirect tax changes in a monetary union," Working Paper Series 1097, European Central Bank.
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