Monetary and Exchange Rate Policy in Multisectorial Economies

Habib Ahmed () and Stephen M. Miller ()

No 1996-11, Working papers from University of Connecticut, Department of Economics

Abstract: We develop a two-sector economy where each sector is classified as classical/Keynesian (contract/noncontract) in the labor market and traded/nontraded in the product market. We consider the effects of changes in monetary and exchange rate policy on sectoral and aggregate prices and outputs for different sectoral characterizations. Duca (1987) shows that nominal wage rigidity facilitates the effectiveness of monetary policy even in the classical sector. We demonstrate that trade price rigidity provides a similar path for the effectiveness of monetary policy, in this case, even when both sectors are classical.

Keywords: multisectoral economies; monetary policy; exchange rate policy (search for similar items in EconPapers)
Date: 1996-08
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Published in Journal of Economics and Business, July/August 1997.

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Journal Article: Monetary and exchange rate policy in multisectoral economies (1997)
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Persistent link: http://EconPapers.repec.org/RePEc:uct:uconnp:1996-11

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