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http://hdl.handle.net/10419/23287
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| Title: | | Optimal Monetary Policy in the Presence of Pricing-to-Market  |
| Authors: | | Michaelis, Jochen |
| Issue Date: | | 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 |
| Appears in Collections: | | Volkswirtschaftliche Diskussionsbeiträge, Universität Kassel
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