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Title:Keeping Up with the Joneses: Implications for the Welfare Effects of Monetary Policy in Open Economies PDF Logo
Authors:Pierdzioch, Christian
Issue Date:2003
Series/Report no.:Kieler Arbeitspapiere 1166
Abstract:A dynamic general equilibrium two-country optimizing model is used to analyze the welfare effects of monetary policy in open economies. The distinguishing feature of the model is that households? preferences feature a "keeping up with the Joneses" effect. This effect implies that households? utility depends upon the level of their consumption relative to the aggregate level of consumption. The model implies that, depending on the strength of the "keeping up with the Joneses" effect, an expansive monetary policy can be a "beggar-thyself" policy. Moreover, the welfare effects of monetary policy are asymmetric across countries.
Subjects:Monetary policy
Consumption externality
Welfare effects
JEL:F42
F41
Document Type:Working Paper
Appears in Collections:Kieler Arbeitspapiere, IfW
Publikationen von Forscherinnen und Forschern des IfW

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