Trade, unemployment, and monetary policy*

• 成果类型: Article
• 署名作者: Cacciatore, Matteo; Ghironi, Fabio
• 署名单位: Universite de Montreal; HEC Montreal; University of Washington; University of Washington Seattle
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2021.103488
• 发表日期: 2021
• 关键词: Trade integration; optimal monetary policy

摘要

We study how trade linkages affect the conduct of monetary policy in a two-country model with heterogeneous firms, endogenous producer entry, and labor market frictions. We show that the ability of the model to replicate key empirical regularities following trade integration-synchronization of business cycles across trading partners and reallocation of market shares toward more productive firms-is central to understanding how trade costs affect monetary policy trade-offs. First, productivity gains through firm selection reduce the need for positive inflation to correct long-run distortions. As a result, lower trade costs reduce the optimal average inflation rate. Second, as stronger trade linkages increase business cycle synchronization, country-specific shocks have more global consequences. Thus, the optimal stabilization policy remains inward looking. By contrast, sub-optimal, inward-looking stabilization-for instance too narrow a focus on price stability-results in larger welfare costs when trade linkages are strong due to inefficient fluctuations in cross-country aggregate demand. (c) 2021 Elsevier B.V. All rights reserved.