IDEAS home Printed from
   My bibliography  Save this article

Demand Shocks and Intertemporal Coordination: A Two Country Model


  • Francesco Saraceno


The effect of demand shocks is studied within an economy characterized by a temporally articulated production structure and bound by rational agents. Hicks' (1973) model is extended in order to include trade between two economies with demand links. This allows to tackle issues as the transmission of shocks and the coordination of monetary policies. By means of numerical simulations the author shows that because of irreversibilities, temporary demand shocks trigger disequilibrium dynamics with permanent effect on the economy. Market imperfections, namely a certain degree of wage and price stickiness, prove necessary to avoid the implosion of the system. An accommodating monetary policy, by softening financial constraints, is effective in stabilizing the economy. When considering trading economies, a certain degree of openness has positive effects, and independent monetary policies may in some occasions be desirable.

Suggested Citation

  • Francesco Saraceno, 2005. "Demand Shocks and Intertemporal Coordination: A Two Country Model," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(2), pages 51-75, May.
  • Handle: RePEc:icf:icfjmo:v:03:y:2005:i:2:p:51-75

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Guillaume Daudin & Jean-Luc Gaffard & Sandrine Levasseur & Catherine Mathieu & Georges Pujals & Michel Quéré & Henri Sterdyniak, 2005. "Competition from emerging countries, international relocation and their impacts on employment," Working Papers hal-01065588, HAL.
    2. repec:spo:wpecon:info:hdl:2441/1931 is not listed on IDEAS
    3. Michel Quéré & Jean-Luc Gaffard, 2005. "Appendix 4 : Relocation : What Matters ? Competition or/and Co-ordination," Sciences Po publications info:hdl:2441/5062, Sciences Po.
    4. Catherine Mathieu & Henri Sterdyniak, 2005. "International relocation and deindustrialisation: some French perspectives," Sciences Po publications N°2005-09, Sciences Po.
    5. repec:spo:wpecon:info:hdl:2441/3383 is not listed on IDEAS
    6. Jean-Luc Gaffard & Michel Quéré, 2005. "Délocalisations : simple affaire de concurrence ou problème de politique économique ?," Revue de l'OFCE, Presses de Sciences-Po, vol. 94(3), pages 193-210.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:icf:icfjmo:v:03:y:2005:i:2:p:51-75. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (G R K Murty). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.