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Labor Immobility and the Transmission Mechanism of Monetary Policy in a Monetary Union

Bernardino Adao (bernardino.pereira.adao@bportugal.pt)
Authors registered in the RePEc Author Service: Isabel Correia (ihc@ucp.pt)

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: It is believed that a shock, common to a set of countries with identical fundamentals, has identical outcomes across countries. We show that in general, when specialization in production is such that a common shock creates a missing role for labor mobility across countries, the terms of trade of any country reacts to the shock. This is the case even if state contingent assets can be traded across countries. The transmission mechanism of a monetary shock in a monetary union has in this case an additional channel, the terms of trade. We also show that the country outcomes are significantly different, when compared with the effect of the shock on the union’s aggregate. Monetary shocks impose cycles with higher volatility in "poor" countries relatively to the volatility of "richer" ones.

JEL-codes: E31 E41 E58 E62 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Labor immobility and the transmission mechanism of monetary policy in a monetary union (2013) Downloads
Working Paper: Labor Immobility and the Transmission Mechanism of Monetary Policy in a Monetary Union (2010) Downloads
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