On the impacts of trend inflation in an open economy*

• 成果类型: Article
• 署名作者: Zhao, Hong
• 署名单位: Nankai University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2022.103648
• 发表日期: 2022
• 关键词: Trend inflation; business cycles; Open economy macroeconomics

摘要

The implications of trend inflation in an open economy are investigated in a two-country DSGE model. The results show that increasing trend inflation from 2 to 4 percent in the domestic country generates a consumption-equivalent welfare loss of about 0.36 percent and 0.04 per-cent in the domestic and foreign countries, respectively. The cooperative optimal monetary pol-icy under commitment with positive trend inflation faces a policy trade-off in response to technology shocks. Incorporating trend inflation in an open economy has new dynamics: do-mestic trend inflation amplifies the spillover effects of a domestic technology shock on foreign countries; trend inflation in foreign countries reinforces these spillover effects through the ef-fect of price dispersion.(c) 2022 Elsevier B.V. All rights reserved.