This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

International Monetary Policy Coordination and Competitive Depreciation: A Re-Evaluation

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Devereux, M.B.
Betts, C.

Additional information is available for the following registered author(s):

Abstract

Is there a need for international coordination of monetary policies within the current system of floating exchange rates? In a recent paper, Obstfeld and Rogo (1995) argue that in an environment of sticky prices, and floating exchange rates, monetary policy shocks will generate positive welfare spillovers across countries. This leads to the conclusion that international monetary policy coordination is unnecessary, and may in fact be undesirable, since it nurtures a bias towards high inflation. The present paper shows that these conclusions are dependent on the manner in which prices are set. When firms engage in 'pricing-to-market' (PTM), setting prices in the currency of the buyer, monetary policy tends to have negative welfare spillovers. This gives an incentive to engage in 'competitive depreciation'. In a noncooperative equilibrium, world inflation will be higher, the greater the importance of PTM. With a high degree of PTM, the case for international monetary policy coordination is restored. If PTM is at an intermediate range, however, international monetary coordination may have no consequences at all.

Download Info
To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Publisher Info
Paper provided by UBC Department of Economics in its series UBC Departmental Archives with number 99-07.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 27 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:ubc:bricol:99-07

Contact details of provider:

For technical questions regarding this item, or to correct its listing, contact: (Maureen Chin).

Related research
Keywords: PRICING ; EXCHANGE RATE ; INTERNATIONAL MONETARY POLICY;

Other versions of this item:

Find related papers by JEL classification:
F30 - International Economics - - International Finance - - - General
F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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.)

  1. Carlo Frenquelli, 2006. "Pricing-to-Market and Exchange Rate Dynamics: A Primer," Rivista di Politica Economica, SIPI Spa, vol. 96(6), pages 105-143, November-. [Downloadable!]
  2. Giancarlo Corsetti & Paolo Pesenti, 2001. "International Dimensions of Optimal Monetary Policy," NBER Working Papers 8230, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Michael B. Devereux & Charles Engel, 2000. "Monetary Policy in the Open Economy Revisited: Price Setting and Exchange Rate Flexibility," Working Papers 042000, Hong Kong Institute for Monetary Research. [Downloadable!]
    Other versions:
  4. Paul Levine & Joseph Pearlman & Peter Welz, 2008. "Robust Inflation-Targeting Rules and the Gains from International Policy Coordination," Department of Economics Discussion Papers 0208, Department of Economics, University of Surrey. [Downloadable!]
  5. Jochen Michaelis, 2005. "Optimal Monetary Policy in the Presence of Pricing-to-Market," Discussion Papers in Economics 68/05, University of Kassel, Institute of Economics. [Downloadable!]
    Other versions:
  6. Michael B. Devereux, 2000. "A Simple Dynamic General Equilibrium Analysis of the Trade-off Between Fixed and Floating Exchange Rates," Econometric Society World Congress 2000 Contributed Papers 1544, Econometric Society. [Downloadable!]
    Other versions:
  7. Devereux, Michael B, 2000. "A Simple Dynamic General Equilibrium Model Of The Tradeoff Between Fixed And Floating Exchange Rates," CEPR Discussion Papers 2403, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  8. Devereux, Michael B & Engel, Charles M, 2000. "Monetary Policy In The Open Economy Revisited: Price Setting Rules And Exchange Rate Flexibility," CEPR Discussion Papers 2454, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Yoshiyasu Ono, 2006. "Protective Trade Policies 'Reduce' Employment: A Dynamic Optimization Approach," ISER Discussion Paper 0659, Institute of Social and Economic Research, Osaka University. [Downloadable!]
  10. Bastiaan Verhoef, 2006. "Pricing-to-market, sectoral shocks and gains from monetary cooperation," DNB Working Papers 110, Netherlands Central Bank, Research Department. [Downloadable!]
Statistics
Access and download statistics

Did you know? About five million pdf files are downloaded through RePEc every year.

This page was last updated on 2009-10-30.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.