Beggar-thyself or beggar-thy-neighbour? The welfare effects of monetary policy

Juha Tervala and Philipp Engler

No 2010/6, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: This paper examines whether monetary expansion is a beggar-thyself or beggar-thy-neighbour policy. Obstfeld and Rogoff (1995) show that monetary expansion under producer currency pricing increases domestic and foreign overall welfare, in cases where the crosscountry substitutability is high. If the cross-country substitutability is low, then monetary expansion is a beggar-thyself policy that reduces domestic welfare and increases foreign welfare (Corsetti & Pesenti 2001; Tille 2001). In this paper, we will show that regardless of whether the cross-country substitutability is high or low, monetary expansion is always a beggar-thyself policy in the short run.

Keywords: Open economy macroeconomics; monetary policy; beggar-thyself; beggar-thy-neighbour (search for similar items in EconPapers)
JEL-codes: E32 E52 F30 F41 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Beggar-thyself or beggar-thy-neighbour? The welfare effects of monetary policy (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:20106

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