The Nonstationarity of Money and Prices in Interdependent Economies

In most nations, paths of monetary aggregates and prices consistently depart from stationary trends. This paper shows that this is a fundamental implication when monetary authorities of interdependent countries seek to smooth their home output and prices in the presence of incomplete world output‐ma...

Full description

Saved in:
Bibliographic Details
Published inReview of international economics Vol. 7; no. 1; pp. 87 - 101
Main Authors Daniels, Joseph P., VanHoose, David D.
Format Journal Article
LanguageEnglish
Published Oxford, UK and Boston, USA Blackwell Publishers Ltd 01.02.1999
Wiley Blackwell
Blackwell
Blackwell Publishing Ltd
SeriesReview of International Economics
Subjects
Central banks
Economic models
Exchange rates
Foreign exchange rates
Interdependence
Monetary policy
Money
Multivariate analysis
Policy co-ordination
Prices
Studies
Online AccessGet full text

Cover

More Information
Summary:In most nations, paths of monetary aggregates and prices consistently depart from stationary trends. This paper shows that this is a fundamental implication when monetary authorities of interdependent countries seek to smooth their home output and prices in the presence of incomplete world output‐market integration and structural asymmetries. Using a two‐country model with interdependent output supply schedules, we show that this conclusion holds whether the exchange rate floats or is fixed. It also holds if monetary policies are coordinated. Therefore, optimal monetary policy choices by central banks yield stationary paths for money and prices only under very specific conditions.
Bibliography:ArticleID:ROIE148
ark:/67375/WNG-9DGXT71W-K
istex:6AAE2AC2EBDE1F64AD2BBFAF26A18F06A4D1C95F
ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0965-7576
1467-9396
DOI:10.1111/1467-9396.00148