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Beggar-thyself or beggar-thy-neighbour? The welfare effects of monetary policy

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  • Tervala, Juha
  • Engler, Philipp

Abstract

This paper examines whether monetary expansion is a beggar-thyself or beggar-thy-neighbour policy. Obstfeld and Rogoff (1995) show that monetary expansion under producer currency pricing increases domestic and foreign overall welfare, in cases where the crosscountry substitutability is high. If the cross-country substitutability is low, then monetary expansion is a beggar-thyself policy that reduces domestic welfare and increases foreign welfare (Corsetti & Pesenti 2001; Tille 2001). In this paper, we will show that regardless of whether the cross-country substitutability is high or low, monetary expansion is always a beggar-thyself policy in the short run. --

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Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2010/6.

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Date of creation: 2010
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Handle: RePEc:zbw:fubsbe:20106

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Related research

Keywords: Open economy macroeconomics; monetary policy; beggar-thyself; beggar-thy-neighbour;

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Cited by:
  1. Philipp Engler, 2011. "Monetary Policy and Unemployment in Open Economies," NCER Working Paper Series 77, National Centre for Econometric Research.

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