Price stability in open economies

• 成果类型: Article
• 署名作者: Benigno, G; Benigno, P
• 署名单位: University of London; London School Economics & Political Science; New York University
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1111/1467-937X.00265
• 发表日期: 2003
• 页码: 743-764
• 关键词: monetary-policy; inflation

摘要

This paper studies the theoretical conditions under which price stability is the optimal policy in a two-country open-economy model with imperfect competition and price stickiness. Special conditions on the levels of country-specific distortionary taxation and the intratemporal and intertemporal elasticities of substitution need to be satisfied. These restrictions apply to both cooperative and non-cooperative settings. Importantly, we show that cooperative and non-cooperative solutions do not coincide despite market completeness and producer currency pricing. We study the conditions under which quadratic approximations of single countries' welfare can be correctly evaluated by relying only on log-linear approximations of the equilibrium conditions.