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dc.contributor.authorCwik, Tobias J.en_US
dc.contributor.authorMüller, Gernot J.en_US
dc.contributor.authorWolters, Maik H.en_US
dc.description.abstractThis paper explores the role of trade integrationor opennessfor monetary policy transmission in a medium-scale New Keynesian model. Allowing for strategic complementarities in price-setting, we highlight a new dimension of the exchange rate channel by which monetary policy directly impacts domestic inflation. Although the strength of this effect increases with economic openness, it also requires that import prices respond to exchange rate changes. In this case domestic producers find it optimal to adjust their prices to exchange rate changes which alter the domestic currency price of their foreign competitors. We pin down key parameters of the model by matching impulse responses obtained from a vector autoregression on U.S. time series relative to an aggregate of industrialized countries. While we find evidence for strong complementarities, exchange rate pass-through is limited. Openness has therefore little bearing on monetary transmission in the estimated model.en_US
dc.publisherGoethe University, Center for Financial Studies (CFS) Frankfurt a. M.en_US
dc.relation.ispartofseriesCFS Working Paper 2008/29en_US
dc.subject.keywordMonetary Policy Transmissionen_US
dc.subject.keywordOpen Economyen_US
dc.subject.keywordTrade Integrationen_US
dc.subject.keywordExchange Rate Channelen_US
dc.subject.keywordStrategic Complementarityen_US
dc.subject.keywordExchange Rate Pass-Throughen_US
dc.subject.stwExchange Rate Pass-Throughen_US
dc.subject.stwOffene Volkswirtschaften_US
dc.titleDoes trade integration alter monetary policy transmission?en_US
dc.typeWorking Paperen_US
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

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