The international transmission of monetary shocks across developed countries: The role of imported raw materials

Juan A. Garcia-Cebro and Ramón Varela-Santamaría

Journal of International Money and Finance, 2011, vol. 30, issue 8, 1791-1813

Abstract: This paper analyzes the implications of a production technology in developed countries (DC) characterized by the share of imported raw materials coming from the less developed countries (LDC). We focus on the question of how this richer productive structure affects the international transmission of a monetary shock across developed countries. In this context, it is shown that (i) the share of raw materials and/or its low substitutability is a source of exchange rate volatility. (ii) Welfare transmission depends critically on the extent of their share in production. (iii) Sufficiently high shares of imported raw materials in the DC production functions explain better positive co-movements between DC outputs.

Keywords: Monetary shocks; Exchange rates; Raw materials (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:30:y:2011:i:8:p:1791-1813

DOI: 10.1016/j.jimonfin.2011.09.007

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