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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 analyzing 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 stabilization relative to inflation stabilization; but the opposite is true in the case of local currency pricing.

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:wly:jmoncb:v:43:y:2011:i:8:p:1735-1748
    DOI: 10.1111/j.1538-4616.2011.00466.x
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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.

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    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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