On the trade balance response to monetary shocks: the Marshall-Lerner conditions reconsidered

Giovanni Lombardo

Discussion Papers from Department of Economics, University of York

Abstract: This paper shows that, by disentangling the degree of monopolistic distortion from the elasticity of substitution between domestic and im-ported goods, we can obtain a negative response of the trade balance to positive monetary shocks, without introducing capital accumula-tion. This result could reconcile the class of models à la Obstfeld and Rogoff (1996, ch. 10) with the stylized fact of counter-cyclical trade balances.

Keywords: trade balance; Marshall-Lerner conditions; elasticity of substitution; monetary shocks; transfer problem (search for similar items in EconPapers)
JEL-codes: C6 E3 E4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-mon
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: On the Trade Balance Response to Monetary Shocks: the Marshall-Lerner Conditions Reconsidered (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:98/5

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