Advanced Search
MyIDEAS: Login to save this paper or follow this series

On the Hump-Shaped Output Effect of Monetary Policy in an Open Economy

Contents:

Author Info

  • Christian Pierdzioch
  • Serkan Yener

Abstract

Results of empirical research have revealed a characteristic hump-shaped effect of monetary policy shocks on output: the effect builds to a peak after several months and then gradually dies out. We analyze, in the context of a "new open economy macroeconomics" model, factors that imply a hump-shaped effect of a monetary policy shock on output. We find that a hump-shaped effect of output is likely to result if the model features a "catching up with the Joneses" effect, pricing-to-market behavior of firms, and imperfect international financial market integration.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: https://www.ifw-members.ifw-kiel.de/publications/on-the-hump-shaped-output-effect-of-monetary-policy-in-an-open-economy
Download Restriction: no

Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1214.

as in new window
Length: 20 pages
Date of creation: May 2004
Date of revision:
Handle: RePEc:kie:kieliw:1214

Contact details of provider:
Postal: Kiellinie 66, D-24105 Kiel
Phone: +49 431 8814-1
Fax: +49 431 85853
Email:
Web page: http://www.ifw-kiel.de
More information through EDIRC

Related research

Keywords: Monetary policy; Catching up with the Joneses; Pricing-to-market; International financial markets;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Peter N. Ireland, 2001. "Endogenous Money or Sticky Prices?," Boston College Working Papers in Economics, Boston College Department of Economics 499, Boston College Department of Economics.
  2. Charles Engel & John H. Rogers, 1994. "How Wide is the Border?," NBER Working Papers 4829, National Bureau of Economic Research, Inc.
  3. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(1), pages 1-45, February.
  4. Abel, Andrew B, 1990. "Asset Prices under Habit Formation and Catching Up with the Joneses," American Economic Review, American Economic Association, American Economic Association, vol. 80(2), pages 38-42, May.
  5. Yongseung Jung & Woon Gyu Choi, 2003. "Optimal Monetary Policy in a Small Open Economy with Habit Formation and Nominal Rigidities," IMF Working Papers 03/5, International Monetary Fund.
  6. Senay, Ozge, 1998. "The Effects of Goods and Financial Market Integration on Macroeconomic Volatility," The Manchester School of Economic & Social Studies, University of Manchester, University of Manchester, vol. 66(0), pages 39-61, Supplemen.
  7. McCallum, B.T. & Nelson, E., 1998. "Nominal Income Targeting in an Open-Economy Optimizing Model," Papers, Stockholm - International Economic Studies 644, Stockholm - International Economic Studies.
  8. Maurice Obstfeld and Kenneth Rogoff., 1995. "Exchange Rate Dynamics Redux," Center for International and Development Economics Research (CIDER) Working Papers, University of California at Berkeley C95-048, University of California at Berkeley.
  9. Heathcote, Jonathan & Perri, Fabrizio, 2002. "Financial autarky and international business cycles," Journal of Monetary Economics, Elsevier, Elsevier, vol. 49(3), pages 601-627, April.
  10. Harald Uhlig & Lars Ljungqvist, 2000. "Tax Policy and Aggregate Demand Management under Catching Up with the Joneses," American Economic Review, American Economic Association, American Economic Association, vol. 90(3), pages 356-366, June.
  11. hafedh bouakez & emanuela cardia, 2003. "Habit Formation and the Persistence of Monetary Shocks," Computing in Economics and Finance 2003, Society for Computational Economics 72, Society for Computational Economics.
  12. John Y. Campbell & John H. Cochrane, 1995. "By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," NBER Working Papers 4995, National Bureau of Economic Research, Inc.
  13. Sutherland, Alan, 1996. " Financial Market Integration and Macroeconomic Volatility," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 98(4), pages 521-39, December.
  14. Julio J. Rotemberg & Michael Woodford, 1998. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy: Expanded Version," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0233, National Bureau of Economic Research, Inc.
  15. Maurice Obstfeld, 2002. "Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics," NBER Working Papers 9118, National Bureau of Economic Research, Inc.
  16. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc.
  17. Klein, Paul, 2000. "Using the generalized Schur form to solve a multivariate linear rational expectations model," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 24(10), pages 1405-1423, September.
  18. Jeffrey C. Fuhrer & Michael W. Klein, 2006. "Risky Habits: on Risk Sharing, Habit Formation, and the Interpretation of International Consumption Correlations," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 14(4), pages 722-740, 09.
  19. McCallum, Bennett T., 1998. "Solutions to linear rational expectations models: a compact exposition," Economics Letters, Elsevier, Elsevier, vol. 61(2), pages 143-147, November.
  20. Bennett McCallum, 2001. "Software for RE Analysis," QM&RBC Codes, Quantitative Macroeconomics & Real Business Cycles 144, Quantitative Macroeconomics & Real Business Cycles, revised Feb 2004.
  21. Dornbusch, Rudiger, 1976. "Exchange rate expectations and monetary policy," Journal of International Economics, Elsevier, Elsevier, vol. 6(3), pages 231-244, August.
  22. John Y. Campbell & John Cochrane, 1999. "Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(2), pages 205-251, April.
  23. Betts, Caroline & Devereux, Michael B., 2000. "Exchange rate dynamics in a model of pricing-to-market," Journal of International Economics, Elsevier, Elsevier, vol. 50(1), pages 215-244, February.
  24. Jung, Yongseung, 2004. "Catching Up with the Joneses in a Sticky Price Model," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 36(1), pages 73-93, February.
  25. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, Elsevier, vol. 12(3), pages 383-398, September.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:kie:kieliw:1214. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dieter Stribny).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.