Openness, Relative Prices and Macro Policies

Joshua Aizenman

No 1233, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes the role of relative prices in the conduct of wage indexation and monetary policy in a small economy producing traded and non-traded goods under a flexible exchange rate regime. It is shown that the beneficial effect of using relative prices in addition to aggregate prices as indicators for the conduct of the above policies increases with openness. The response of policies to relative prices rises with openness,and has dampening effects on the volatility of deviations from purchasing power parity. The analysis demonstrates that the beneficial effect of allowing a"basket" indexation (or a money rule that responds also to relative prices) lies in mitgating the effects of foreign shocks.

Date: 1983-11
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published as Aizenman, Joshua. "Openness, Relative Prices and Macro-Policies." Journal of International Money and Finance, Vol. 4, No. 1, (March 1985), pp. 5-17.

Downloads: (external link)
http://www.nber.org/papers/w1233.pdf (application/pdf)

Related works:
Journal Article: Openness, relative prices, and macro-policies (1985)
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:nbr:nberwo:1233

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1233

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().