Should the Core Fear the Outs? Price Setting Practices and International Monetary Transmission

WP Series in Economics and Finance No. 203

22 Pages Posted: 7 Feb 1998

See all articles by Richard Friberg

Richard Friberg

Stockholm School of Economics - Department of Economics

Date Written: November 4, 1997

Abstract

This paper examines the response of national consumption, production and welfare to asymmetric monetary shocks. We do so in a two-country model (country "Core" and country "Out") characterized by monopolistic competition and price rigidities. A large degree of goods market segmentation and local currency pricing leads to monetary policy having beggar-thy-neighbor effects. Increased price setting in the Core currency by Out lessens the negative spill-over on Core from Out monetary policy. It has a negative impact on the welfare spill-overs on Out from Core monetary policy.

JEL Classification: F36, F41, F42

Suggested Citation

Friberg, Richard, Should the Core Fear the Outs? Price Setting Practices and International Monetary Transmission (November 4, 1997). WP Series in Economics and Finance No. 203, Available at SSRN: https://ssrn.com/abstract=57748 or http://dx.doi.org/10.2139/ssrn.57748

Richard Friberg (Contact Author)

Stockholm School of Economics - Department of Economics ( email )

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