Beyond Competitive Devaluations: The Monetary Dimensions of Comparative Advantage

Paul Bergin and Giancarlo Corsetti

American Economic Journal: Macroeconomics, 2020, vol. 12, issue 4, 246-86

Abstract: Motivated by the long-standing debate on competitive devaluation, we propose a new perspective on how monetary and exchange rate policies can contribute to a country's international competitiveness. We refocus the analysis on the implications of monetary stabilization for a country's comparative advantage. We develop a two-country New Keynesian model with two tradable sectors in each country: one perfectly competitive, the other producing differentiated goods under monopolistic competition subject to sunk entry costs and nominal rigidities and hence more sensitive to macroeconomic uncertainty. Monetary policy can disproportionately foster competitiveness of differentiated goods firms, ultimately affecting the composition of domestic output and exports.

JEL-codes: E12 E23 E52 F11 F31 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (15)

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Related works:
Working Paper: Beyond Competitive Devaluations: The Monetary Dimensions of Comparative Advantage (2019)
Working Paper: Beyond Competitive Devaluations: The Monetary Dimensions of Comparative Advantage (2015)
Working Paper: Beyond Competitive Devaluations: The Monetary Dimensions of Comparative Advantage (2015)
Working Paper: Beyond Competitive Devaluations: The Monetary Dimensions of Comparative Advantage (2015)
Working Paper: Beyond competitive devaluations:The monetary dimensions of comparative advantage (2015)
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DOI: 10.1257/mac.20160094

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