@techreport{Schmidt2005International,
abstract = {How does an unexpected domestic monetary expansion affect the foreign economy? Does it induce an increase or a decline in foreign production? In the traditional two-country Mundell-Fleming model, monetary policy has beggar-thy-neighbor effects. Yet, empirical evidence from VARs indicates that U.S. monetary policy has positive international transmission effects on both foreign (non-U.S. G-7) output and aggregate demand. In this paper, I will show that a two-country dynamic general equilibrium model with sticky prices can account for these stylized facts if we allow for international asymmetries in the price-setting behavior of firms. If U.S. firms set export prices in their own currency only (producer-currency pricing), whereas producers in the rest of the world price their exports to the U.S. in the local currency of the export market (local-currency pricing), a U.S. monetary expansion is found to increase output and aggregate demand abroad.},
address = {Z\"{u}rich},
author = {Caroline Schmidt},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
doi = {10.3929/ethz-a-004957474},
keywords = {F41; E52; 330; Local-currency pricing; Producer-currency pricing; New Open Economy Macroeconomics; International transmission effects of monetary policy; Transmissionsmechanismus; Geldpolitik; Betriebliche Preispolitik; Offene Volkswirtschaft},
language = {eng},
number = {102},
publisher = {KOF},
title = {International transmission effects of monetary policy shocks: Can asymmetric price setting explain the stylized facts?},
type = {Arbeitspapiere // Konjunkturforschungsstelle, Eidgen\"{o}ssische Technische Hochschule Z\"{u}rich},
url = {http://hdl.handle.net/10419/50814},
year = {2005}
}
