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Monetary and Exchange Rate Policy in Multisectorial Economies

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Author Info
Habib Ahmed (National University of Singapore)
Stephen M. Miller (University of Connecticut)

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Abstract

We develop a two-sector economy where each sector is classified as classical/Keynesian (contract/noncontract) in the labor market and traded/nontraded in the product market. We consider the effects of changes in monetary and exchange rate policy on sectoral and aggregate prices and outputs for different sectoral characterizations. Duca (1987) shows that nominal wage rigidity facilitates the effectiveness of monetary policy even in the classical sector. We demonstrate that trade price rigidity provides a similar path for the effectiveness of monetary policy, in this case, even when both sectors are classical.

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File URL: http://www.econ.uconn.edu/working/1996-11.pdf
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Publisher Info
Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 1996-11.

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Length: 21 pages
Date of creation: Aug 1996
Date of revision:
Publication status: Published in Journal of Economics and Business, July/August 1997.
Handle: RePEc:uct:uconnp:1996-11

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Related research
Keywords: multisectoral economies; monetary policy; exchange rate policy;

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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.:
  1. Alan S. Blinder & N. Gregory Mankiw, 1984. "Aggregation and Stabilization Policy in a Multi-Contract Economy," NBER Working Papers 0873, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Bruno, Michael, 1976. "The Two-Sector Open Economy and the Real Exchange Rate," American Economic Review, American Economic Association, vol. 66(4), pages 566-77, September. [Downloadable!] (restricted)
  3. Duca, John V. & VanHoose, David D., 1990. "Optimal monetary policy in a multisector economy with an economywide money market," Journal of Economics and Business, Elsevier, vol. 42(4), pages 253-263, November. [Downloadable!] (restricted)
    Other versions:
  4. Craig, Gary A, 1981. "A Monetary Approach to the Balance of Trade," American Economic Review, American Economic Association, vol. 71(3), pages 460-66, June. [Downloadable!] (restricted)
  5. Waller, Christopher J, 1992. "The Choice of a Conservative Central Banker in a Multisector Economy," American Economic Review, American Economic Association, vol. 82(4), pages 1006-12, September. [Downloadable!] (restricted)
  6. Duca, John V, 1987. "The Spillover Effects of Nominal Wage Rigidity in a Multisector Economy: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(1), pages 117-21, February. [Downloadable!] (restricted)
  7. Calvo, Guillermo A, 1978. "Urban Employment and Wage Determination in LDC's: Trade Unions in the Harris-Todaro Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(1), pages 65-81, February. [Downloadable!] (restricted)
  8. Rodrik, Dani, 1990. "How should structural adjustment programs be designed?," World Development, Elsevier, vol. 18(7), pages 933-947, July. [Downloadable!] (restricted)
  9. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-93, August. [Downloadable!] (restricted)
  10. R'dseth, Asbj'rn, 1979. " Macroeconomic Policy in a Small Open Economy," Scandinavian Journal of Economics, Blackwell Publishing, vol. 81(1), pages 48-59.
  11. Paul Hallwood & Ronald MacDonald, 2008. "International Money and Finance," Working papers 2008-02, University of Connecticut, Department of Economics. [Downloadable!]
  12. Schultze, Charles L, 1984. "Cross-Country and Cross-Temporal Differences in Inflation Responsiveness," American Economic Review, American Economic Association, vol. 74(2), pages 160-65, May. [Downloadable!] (restricted)
  13. Laurence Ball & N. Gregory Mankiw & David Romer, 1988. "The New Keynsesian Economics and the Output-Inflation Trade-off," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1988-1), pages 1-82. [Downloadable!]
  14. Dimitri G. Demekas, 1990. "Labor Market Segmentation In A Two-Sector Model Of An Open Economy," IMF Working Papers 90/33, International Monetary Fund.
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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. Georgios E. Chortareas & Stephen M. Miller, 2000. "Optimal Central Banker Contracts and Common Agency," Working papers 2000-03, University of Connecticut, Department of Economics, revised Jun 2002. [Downloadable!]
    Other versions:
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