International Transmission of Monetary Shocks in a Ricardian World
This paper investigates how monetary shocks are transmitted internationally. It shows that where a national currency is used as an international medium of exchange, the international money is non-neutral. In particular, an increase in the supply of international money leads to a transfer of real resources to the international money-issuing country from its trading partner. It induces an expansion of the non-tradable sector in the international money-issuing country, and an expansion the tradable sector in its trading partner. The real impact of a monetary shock is greater under a fixed exchange rate system than under a flexible exchange rate system.
|Date of creation:||May 2010|
|Contact details of provider:|| Postal: Department of Economics, Monash University, Victoria 3800, Australia|
Web page: http://business.monash.edu/economics
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