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Monetary policy, foreign welfare, and international firm mobility

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  • Wataru Johdo

Abstract

type="main" xml:lang="en"> In this paper, we develop a new open economy macroeconomics model that incorporates international relocation of firms. A novel feature of our model is that the international distribution of firms responds to exchange rate movements caused by monetary shocks. This implies that our model generates an international transmission effect that operates through the international relocation of firms. We conclude that when the degree of flexibility in relocation between the two countries is sufficiently high, an expansionary monetary policy can be a “beggar-thy-neighbor” policy.

Suggested Citation

  • Wataru Johdo, 2015. "Monetary policy, foreign welfare, and international firm mobility," International Journal of Economic Theory, The International Society for Economic Theory, vol. 11(3), pages 311-328, September.
    • Handle: RePEc:bla:ijethy:v:11:y:2015:i:3:p:311-328
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    Cited by:

    1. Dohwa, Kohjiro, 2018. "The role of local currency pricing in international transmission effects of corporate tax reduction in an economy with vertical production linkage and foreign direct investment," MPRA Paper 86394, University Library of Munich, Germany.
    2. Dohwa, Kohjiro, 2024. "The role of local currency pricing in the international transmission effects of a government spending shock in an economy with vertical production linkage and foreign direct investment," Journal of Macroeconomics, Elsevier, vol. 80(C).
    3. Wataru Johdo, 2019. "Deregulation in non-tradable goods sector and relocation of firms in tradable goods sector," Economics Bulletin, AccessEcon, vol. 39(4), pages 2507-2516.
    4. Wataru Johdo, 2022. "International worker mobility and the effects of monetary policy shocks," Economics Bulletin, AccessEcon, vol. 42(2), pages 523-535.
    5. Wataru Johdo, 2019. "Tariffs, the exchange rate, and location," Economics Bulletin, AccessEcon, vol. 39(2), pages 741-750.

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