EconPapers    
Economics at your fingertips  
 

Excess Capacity, Monopolistic Competition, and International Transmission of Monetary Disturbances

Lars Svensson and Sweder van Wijnbergen

No 2262, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A stochastic two-country neoclassical rational expectations model with sticky prices -- optimally set by monopolistically competitive firms -- and possible excess capacity is developed to examine international spillover effects on output of monetary disturbances. The Mundell-Fleming model predicts that monetary expansion at home leads to recession abroad. In contrast, our main result is that spillover effects of monetary policy may be either positive or negative, depending upon whether the intertemporal elasticity of substitution in consumption exceeds the intratemporal elasticity of substitution. The model in addition is used to determine nominal and real interest rates, exchange rates, and other asset prices.

Date: 1987-05
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (75)

Published as The Economic Journal, Vol. 99, No. 397, pp. 785-805, (September 1989).

Downloads: (external link)
http://www.nber.org/papers/w2262.pdf (application/pdf)

Related works:
Journal Article: Excess Capacity, Monopolistic Competition, and International Transmission of Monetary Disturbances (1989) Downloads
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:2262

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w2262

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 (wpc@nber.org).

 
Page updated 2025-03-31
Handle: RePEc:nbr:nberwo:2262