Production Relocation and the Effect of Monetary Policy

Hiroyuki Nishiyama

Journal of Economic Integration, 2005, vol. 20, 93-108

Abstract:

This paper analyzes the macroeconomic effect of production relocation by using an open economy macroeconomic model. Our analysis shows, paradoxically, that acceleration in production relocation might have an expansive effect on the home economy. We also show that monetary expansion has welfare-enhancing effects even in an economy where production relocation exists. However, advancing production relocation amplifies the effect of monetary policy on the exchange rate. On the other hand, it reduces the effect on the relative home income by advancing production relocation.

Keywords: Monetary policy; Production relocation; Hollowing out; Beggarthy-neighbor (search for similar items in EconPapers)
JEL-codes: F23 F41 F42 (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0307

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