Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/17818
Authors: 
Pierdzioch, Christian
Year of Publication: 
2003
Series/Report no.: 
Kiel Working Paper 1141
Abstract: 
This paper uses a dynamic general equilibrium two-country optimizing model to analyze the consequences of international capital mobility for the effects of monetary policy in open economies. The model shows that the difference between the short-run output effects of monetary policy shocks in a world of high capital mobility and those in a world of low capital mobility decreases if households have a home-product bias in preferences. This result implies that, in contrast to conventional wisdom derived from the textbook Mundell-Fleming model, the empirically observed integration of international financial markets need not result in a significant change in the propagation of monetary policy shocks if households have a strong bias for consuming home products.
Subjects: 
Monetary Policy
Capital mobility
Home-product bias
JEL: 
F41
F36
F32
Document Type: 
Working Paper

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