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International Spillover Effects and Monetary Policy Activism

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  • ANNA LIPIŃSKA
  • MORTEN SPANGE
  • MISA TANAKA

Abstract

This paper examines how the preferences of a large economy’s central bank affect the trade-off between output and inflation volatility faced by the central bank of a small open economy by analysing the impact of a global cost-push shock. We demonstrate that under the assumption of producer currency pricing, the trade-off faced by the small open economy is likely to worsen as the foreign central bank becomes more focused on output stabilisation relative to inflation stabilisation; but the opposite is true in the case of local currency pricing.
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Suggested Citation

  • Anna Lipińska & Morten Spange & Misa Tanaka, 2011. "International Spillover Effects and Monetary Policy Activism," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(8), pages 1735-1748, December.
  • Handle: RePEc:mcb:jmoncb:v:43:y:2011:i:8:p:1735-1748 DOI: j.1538-4616.2011.00466.x
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    File URL: http://hdl.handle.net/10.1111/j.1538-4616.2011.00466.x
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    References listed on IDEAS

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    1. Michael Woodford, 2007. "Globalization and Monetary Control," NBER Chapters,in: International Dimensions of Monetary Policy, pages 13-77 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Haberis, Alex & Lipińska, Anna, 2012. "International policy spillovers at the zero lower bound," Bank of England working papers 464, Bank of England.
    2. von Thadden, Leopold & Lipińska, Anna, 2009. "Monetary and fiscal policy aspects of indirect tax changes in a monetary union," Working Paper Series 1097, European Central Bank.

    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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