Aggregate Supply and Demand, the Real Exchange Rate and Oil Price Denomination

Yiannis Stournaras (stournaras@grmail.com)
Additional contact information
Yiannis Stournaras: Bank of Greece and University of Athens

No 26, Working Papers from Bank of Greece

Abstract: In an aggregate supply, aggregate demand model of an open economy with imperfect competition in labour and product markets, the effectiveness of monetary and fiscal policies depends on the degree of wage indexation, the exchange rate regime and the currency denomination of the international prices of raw materials, such as oil. In a two country world with a floating exchange rate, real consumer wage rigidity and the prices of imported raw materials fixed in the currency of Country 2, monetary policy is effective only in Country 2, but fiscal policy is relatively more effective in Country 1. These results may explain certain characteristics and have certain implications for economic policy in the US and the Eurozone.

Keywords: Open economy macroeconomics; real exchange rate; oil price denomination (search for similar items in EconPapers)
JEL-codes: F41 Q43 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2005-07
New Economics Papers: this item is included in nep-cba, nep-ene and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.bankofgreece.gr/BogEkdoseis/Paper200526.pdf Full Text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bog:wpaper:26

Access Statistics for this paper

More papers in Working Papers from Bank of Greece Contact information at EDIRC.
Bibliographic data for series maintained by Anastasios Rizos (arizos@bankofgreece.gr).