Monetary Policy and Redistribution in Open Economies

51 Pages Posted: 21 Dec 2020 Last revised: 3 Aug 2024

See all articles by Xing Guo

Xing Guo

Government of Canada - Bank of Canada

Pablo Ottonello

University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)

Diego Perez

New York University (NYU) - Department of Economics

Date Written: December 2020

Abstract

We study how monetary policy affects the asymmetric effects of globalization. To this end, we build an open-economy heterogeneous-agent New Keynesian model (HANK), in which households differ in their income, wealth, and real and financial integration with international markets. We use the model to reassess classic questions in international macroeconomics, but from a distributional perspective: What are the international spillovers of policies and shocks, how do alternative exchange-rate regimes compare, and what are the implications for monetary policy of the international price system. Our results indicate the presence of a trade-off between aggregate stabilization and inequality in consumption responses to external shocks. The asymmetric effects of globalization can be smaller for economies with higher international integration.

Suggested Citation

Guo, Xing and Ottonello, Pablo and Perez, Diego J., Monetary Policy and Redistribution in Open Economies (December 2020). NBER Working Paper No. w28213, Available at SSRN: https://ssrn.com/abstract=3753123

Xing Guo (Contact Author)

Government of Canada - Bank of Canada

Pablo Ottonello

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Diego J. Perez

New York University (NYU) - Department of Economics ( email )

19 West 4th Street
New York, NY 10012
United States

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