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Vertical International Trade as a Monetary Transmission Mechanism in an Open Economy Author info | Abstract | Publisher info | Download info | Related research | Statistics Kevin X. D. Huang () (Utah State University)
Zheng Liu () (Clark University and CREFE )
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This paper analyzes a two-country general equilibrium model with multiple stages of production and sticky prices. Working through the cross-country input-output relations and endogenous price stickiness, the model generates the observed patterns in international aggregate comovements following monetary shocks. In particular, both output and consumption comove across countries, and output correlation is larger than consumption correlation, as in the data. The model also generates persistent fluctuations of real exchange rates. Thus, vertical international trade plays an important role in propagating monetary shocks in an open economy.
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Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number
107.
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Length: 28 pages
Date of creation: Feb 2000Date of revision:
Handle: RePEc:cre:crefwp:107Contact details of provider: Postal: P.O. Box 8888, Downtown Station, Montreal (Canada) Quebec, H3C 3P8 Phone: (514) 987-6181 Fax: (514) 987-8494 Email: Web page: http://ideas.uqam.ca/CREFE/ More information through EDIRC
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Keywords: Vertical International Trade ; Monetary Policy ; International Comovements ; Real Exchange Rate Persistence ; Other versions of this item:
Find related papers by JEL classification: E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles F31 - International Economics - - International Finance - - - Foreign Exchange F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Kevin X. D. Huang & Zheng Liu, 2004.
"Multiple stages of processing and the quantity anomaly in international business cycle models ,"
Working Papers
04-8, Federal Reserve Bank of Philadelphia.
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"Production, Trade, and International Comovement ,"
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Kevin X.D. Huang & Zheng Liu, 2005.
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