Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/17777 
Year of Publication: 
2002
Series/Report no.: 
Kiel Working Paper No. 1110
Publisher: 
Kiel Institute for World Economics (IfW), Kiel
Abstract: 
This paper uses a dynamic general equilibrium two-country optimizing model to analyze the consequences of international capital mobility for the effectiveness of monetary policy in open economies. The model shows that the substitutability of goods produced in different countries plays a central role for the impact of international capital mobility on the effectiveness of monetary policy. Paralleling the results of the traditional Mundell-Fleming model, a higher degree of international capital mobility increases the effectiveness of monetary policy only if the Marshall-Lerner condition, which is linked to the cross-country substitutability of goods, holds.
Subjects: 
Monetary policy
Capital mobility
JEL: 
F41
F32
F36
Document Type: 
Working Paper

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