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The international transmission of monetary shocks across developed countries: The role of imported raw materials

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  • Garcia-Cebro, Juan A.
  • Varela-Santamaría, Ramón

Abstract

This paper analyzes the implications of a production technology in developed countries (DC) characterized by the share of imported raw materials coming from the less developed countries (LDC). We focus on the question of how this richer productive structure affects the international transmission of a monetary shock across developed countries. In this context, it is shown that (i) the share of raw materials and/or its low substitutability is a source of exchange rate volatility. (ii) Welfare transmission depends critically on the extent of their share in production. (iii) Sufficiently high shares of imported raw materials in the DC production functions explain better positive co-movements between DC outputs.

Suggested Citation

  • Garcia-Cebro, Juan A. & Varela-Santamaría, Ramón, 2011. "The international transmission of monetary shocks across developed countries: The role of imported raw materials," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1791-1813.
    • Handle: RePEc:eee:jimfin:v:30:y:2011:i:8:p:1791-1813
    DOI: 10.1016/j.jimonfin.2011.09.007
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    More about this item

    Keywords

    Monetary shocks; Exchange rates; Raw materials;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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