Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/17741
Authors: 
Pierdzioch, Christian
Yener, Serkan
Year of Publication: 
2004
Series/Report no.: 
Kiel Working Paper 1198
Abstract: 
We develop a dynamic general equilibrium two-economy model in order to analyze the welfare effects of monetary policy in open economies. The model features two distortions: one distortion due to monopolistic competition, and one distortion due to a consumption externality. This consumption externality arises because households' preferences feature a ?keeping up with the rest of the world? effect. This effect implies that households' utility depends upon the level of their consumption relative to the average consumption in the world. We show that, depending on the relative magnitude of the monopolistic distortion and the consumption externality, an expansive monetary policy can result in an increase or a decrease of households' welfare.
Subjects: 
Monetary policy
Consumption externality
Welfare effects
JEL: 
F41
F42
Document Type: 
Working Paper

Files in This Item:
File
Size
292.03 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.