In this paper we develop Dixon and Hansen (1997) to allow for two-sector small open economy in which the non-traded sector is monopolistic. The closed economy version of the model generalises Dixon/Hansen to allow for diminishing returns on the traded sector. We compare the short-run impact of menu costs on the economy and also the size of menu costs needed to sustain nominal rigidity in both the open and closed economies. We find that whilst the welfare gains from monetary expansion are of a similar magnitude, nominal rigidity can occur for much smaller menu costs than in the closed economy case. Hence we argue that menu costs and the resultant nominal rigidities are more likely to be important in an open economy.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Department of Economics, University of York in its series Discussion Papers with number
98/2.
Length: Date of creation: Date of revision: Handle: RePEc:yor:yorken:98/2
Contact details of provider: Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom Phone: (0)1904 433776 Fax: (0)1904 433759 Email: Web page: http://www.york.ac.uk/depts/econ/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Paul Hodgson).
Find related papers by JEL classification: D40 - Microeconomics - - Market Structure and Pricing - - - General E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data) L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
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.: