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Beggar-thyself or beggar-thy-neighbour? The welfare effects of monetary policy

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  • Tervala, Juha
  • Engler, Philipp

Abstract

This paper examines whether monetary expansion is a beggar-thyself or beggar-thy-neighbour policy. Obstfeld and Rogoff (1995) show that monetary expansion under producer currency pricing increases domestic and foreign overall welfare, in cases where the crosscountry substitutability is high. If the cross-country substitutability is low, then monetary expansion is a beggar-thyself policy that reduces domestic welfare and increases foreign welfare (Corsetti & Pesenti 2001; Tille 2001). In this paper, we will show that regardless of whether the cross-country substitutability is high or low, monetary expansion is always a beggar-thyself policy in the short run.

Suggested Citation

  • Tervala, Juha & Engler, Philipp, 2010. "Beggar-thyself or beggar-thy-neighbour? The welfare effects of monetary policy," Discussion Papers 2010/6, Free University Berlin, School of Business & Economics.
    • Handle: RePEc:zbw:fubsbe:20106
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    Cited by:

    1. Tervala, Juha, 2012. "International welfare effects of monetary policy," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 356-376.
    2. Philipp Engler, 2011. "Monetary Policy and Unemployment in Open Economies," NCER Working Paper Series 77, National Centre for Econometric Research.

    More about this item

    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F30 - International Economics - - International Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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