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Optimal monetary rules and internationalized production

  • Lilia Cavallari

    (University of Rome III, Italy)

This paper explores the implications of international location of production for the optimal design of monetary policy in a framework that allows for price discrimination across international markets. By introducing multinational production in a dynamic open economy, the paper shows that optimal monetary rules do not react to foreign cyclical conditions. The paper further shows that non-cooperative monetary rules cannot restore the flexible price allocation while international monetary cooperation can do so. Copyright © 2004 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 9 (2004)
Issue (Month): 2 ()
Pages: 175-186

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Handle: RePEc:ijf:ijfiec:v:9:y:2004:i:2:p:175-186
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