Beggar-thyself or beggar-thy-neighbour? The welfare effects of monetary policy

Philipp Engler and Juha Tervala

Economic Modelling, 2011, vol. 28, issue 4, 2034-2040

Abstract: This paper examines whether monetary expansion is a beggar-thyself or beggar-thy-neighbour policy. Obstfeld and Rogoff (1995) show that monetary expansion under producer currency pricing increases domestic and foreign overall welfare, in cases where the cross-country substitutability is high. If the cross-country substitutability is low, then monetary expansion is a beggar-thyself policy that reduces domestic welfare and increases foreign welfare (Corsetti & Pesenti 2001; Tille 2001). In this paper, we will show that regardless of whether the cross-country substitutability is high or low, monetary expansion is always a beggar-thyself policy in the short run.

Keywords: Open; economy; macroeconomics; Monetary; policy; Beggar-thyself; Beggar-thy-neighbour (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:28:y:2011:i:4:p:2034-2040

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