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On the hump-shaped output effect of monetary policy in an open economy

  • Christian Pierdzioch


  • Serkan Yener

Results of empirical research have revealed a characteristic hump-shaped effect of monetary policy shocks on output: the effect builds to a peak after several months and then gradually dies out. We analyze, in the context of a "new open economy macroeconomics" model, factors that imply a hump-shaped effect of a monetary policy shock on output. We find that a hump-shaped effect of output is likely to result if the model features a "catching up with the Joneses" effect, pricing-to-market behavior of firms, and imperfect international financial market integration.

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Article provided by Springer in its journal International Economics and Economic Policy.

Volume (Year): 4 (2007)
Issue (Month): 1 (April)
Pages: 1-13

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Handle: RePEc:kap:iecepo:v:4:y:2007:i:1:p:1-13
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