Globalisation and Monetary Policy
AbstractThis paper studies the implications of globalisation for the effectiveness of monetary policy in large open economies, such as the euro area and the United States. The analysis allows for imperfect competition and an endogenous home bias in consumption. I find that globalisation (a reduction in the costs of international trade) causes a monetary expansion to have a larger (smaller) e�ect on prices (output). To the extent that globalisation also induces stronger competition in the goods market, I find that its impact on the incentive for activist monetary policy is ambiguous. Finally, globalisation reduces the beggary-thy-neighbour effects of monetary policy.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 048.
Date of creation: Aug 2005
Date of revision:
trade costs; openness; monetary policy.;
Find related papers by JEL classification:
- F15 - International Economics - - Trade - - - Economic Integration
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-09-11 (All new papers)
- NEP-CBA-2005-09-11 (Central Banking)
- NEP-FMK-2005-09-11 (Financial Markets)
- NEP-INT-2005-09-11 (International Trade)
- NEP-MAC-2005-09-11 (Macroeconomics)
- NEP-MON-2005-09-11 (Monetary Economics)
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