The welfare effect of international asset market integration under nominal rigidities

• 成果类型: Article
• 署名作者: Tille, C
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - New York
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2003.09.003
• 发表日期: 2005
• 页码: 221-247
• 关键词: International risk sharing; exchange rate pass-through; Welfare effect

摘要

This paper assesses the impact of integrating international asset markets when segmented markets are not the only distortion. Using a two-country general equilibrium model with nominal rigidities and monetary shocks, we show that integration is not universally beneficial. Instead, the welfare impact depends on the degree to which exchange rate fluctuations are passed through to consumer prices. While the integration is welfare neutral in the polar cases of complete or zero pass-through, this is not the case when pass-through is partial. When shocks are equally volatile in both countries, integration can be detrimental or beneficial depending on the degree of pass-through. When shocks are more volatile in one country, it benefits from integration compared with the more stable country. (C) 2004 Elsevier B.V. All rights reserved.