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Title:Capital Mobility, Consumption Substitutability, and the Effectiveness of Monetary Policy in Open Economies PDF Logo
Authors:Pierdzioch, Christian
Issue Date:2002
Series/Report no.:Kieler Arbeitspapiere 1110
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
Appears in Collections:Kieler Arbeitspapiere, IfW
Publikationen von Forscherinnen und Forschern des IfW

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