Monetary Policy during Unbalanced Global Recoveries

Luca Fornaro and Federica Romei

No 16971, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study optimal monetary policy during times of exceptionally high global demand for tradable goods, relative to non-tradable services. The optimal monetary response entails a rise in inflation, which helps rebalance production toward the tradable sector. While the inflation costs are fully beared domestically, however, part of the gains in terms of higher supply of tradable goods spill over to the rest of the world. National central banks may thus fall into a coordination trap, and implement an excessively tight monetary policy during tradable goods-driven recoveries.

Date: 2022-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP16971 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:16971

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP16971

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().