Logo
Munich Personal RePEc Archive

The role of local currency pricing in international transmission effects of monetary and productivity shocks in an economy with vertical production linkage and firm entry

Dohwa, Kohjiro (2018): The role of local currency pricing in international transmission effects of monetary and productivity shocks in an economy with vertical production linkage and firm entry.

Warning
There is a more recent version of this item available.
[thumbnail of MPRA_paper_86351.pdf]
Preview
PDF
MPRA_paper_86351.pdf

Download (245kB) | Preview

Abstract

In this paper, we construct a two-country model with the three factors of asymmetry in price-setting behavior between home and foreign intermediate goods firms, vertical production and trade, and endogenous entry of home and foreign final goods firms. We mainly examine the effect of asymmetric price-setting behavior on the welfare effects of monetary and productivity shocks, taking into account firm entry and exit. We show that when the ratio of home and/or foreign intermediate goods firms that set their export prices in the local currency rises, a home monetary shock has a beggar-thy-neighbor effect. In scenarios other than one where the ratios of both countries' intermediate goods firms that set their export prices in the local currency are unity, we show that the two types of home productivity shocks cause foreign welfare to deteriorate. When the ratios of both countries' intermediate goods firms that set their export prices in the local currency are unity, we show that the two types of home productivity shocks have a different effect on foreign welfare.

Available Versions of this Item

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.