Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/23287
Authors: 
Michaelis, Jochen
Year of Publication: 
2005
Series/Report no.: 
Volkswirtschaftliche Diskussionsbeiträge / Universität Kassel, Fachbereich Wirtschaftswissenschaften 68
Abstract: 
This paper presents a general-equilibrium framework to revisit the issues of optimal monetary policies and international policy coordination in a two-country model, focusing on the role of a pricing-to-market (PTM) policy by firms. Both countries may be different with respect to PTM. Using the set-up developed by Corsetti and Pesenti (2001a) and Betts and Devereux (2000a,b), we show that (i) for a given Foreign monetary stance, a Home monetary expansion is beneficial for both countries only if Home PTM is at an intermediate range; (ii) in a world Nash equilibrium Home and Foreign welfare are bell-shaped in the degrees of PTM; (iii) relative welfare crucially depends on the degrees of PTM; (iv) there is a welfare gain from cooperation even in the cases of no and full PTM.
Subjects: 
pricing to market
terms of trade
international coordination of monetary policies
JEL: 
E40
F42
F41
Document Type: 
Working Paper

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