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|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|27356||2011||7 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Economic Modelling, Volume 28, Issue 4, July 2011, Pages 2034–2040
This paper examines whether monetary expansion is a beggar-thyself or beggar-thy-neighbour policy. Obstfeld and Rogoff (1995) show that monetary expansion under producer currency pricing increases domestic and foreign overall welfare, in cases where the cross-country substitutability is high. If the cross-country substitutability is low, then monetary expansion is a beggar-thyself policy that reduces domestic welfare and increases foreign welfare (Corsetti & Pesenti 2001; Tille 2001). In this paper, we will show that regardless of whether the cross-country substitutability is high or low, monetary expansion is always a beggar-thyself policy in the short run.
The U.S. Federal Reserve and the European Central Bank have implemented expansionary monetary policies during the recent global recession in an attempt to stimulate their economies. An important question about expansionary monetary policies is whether such a policy stance is beggar-thy-neighbour or beggar-thyself, that is, whether it is beneficial or detrimental for the domestic economy, and what the effects are for the rest of the world. With flexible exchange rates and open capital markets, a permanent increase in the supply of money depreciates the currency and increases exports and employment. From the perspective of the traditional Mundell–Fleming model, this policy is beggar-thy-neighbour, and is recommended to the domestic policy maker if increasing output is the policy goal. Since the publication of the Redux model by Obstfeld and Rogoff (1995), the question of whether a permanent monetary expansion is welfare improving or not has been analysed in the framework of fully micro-founded two-country models.2 The welfare measure employed is the discounted present value (DPV) of the change in utility of the domestic and foreign representative households. Obstfeld and Rogoff show that a monetary shock increases the DPV of utility by the same amount in both countries, in cases where the elasticity of substitution between goods produced in different countries (the cross-country substitutability) is the same as the elasticity of substitution between goods produced in the same country (the within-country substitutability). On the other hand, Corsetti and Pesenti, 2001 and Tille, 2001 find that the gains in domestic output are more than offset by deteriorating terms of trade, if the cross-country substitutability is lower than the within-country substitutability.3 What has been missing until recently in this literature, however, was a thorough analysis of the evolution of welfare over time.4 The contribution of this paper is to go beyond the above-mentioned studies, which employ simultaneous one-step-ahead pricing, and to analyse the welfare effects of monetary policy over time. To do this, we extend these models with the Calvo-pricing mechanism. The main finding of this paper is that the frameworks of Obstfeld and Rogoff, 1995, Corsetti and Pesenti, 2001 and Tille, 2001 in the end generate a common result: A monetary shock is a beggar-thyself policy in the short run, no matter whether the cross-country substitutability is equal to or is smaller than the within-country substitutability. Therefore, the expansionary monetary policies of the U.S. Federal Reserve and the European Central Bank might have a negative effect on welfare in the short run and increase welfare only after some time. The intuition behind this result is the following: In all cases, a monetary shock causes an increase in domestic output without an equivalent increase in consumption. In addition, we show that a high value of the cross-country substitutability implies a higher decrease in domestic welfare in the short run. That is, the beggar-thyself effect is strongest in the Obstfeld–Rogoff case. The main reason is that a high cross-country substitutability implies a strong expenditure switching effect. This causes a high response of output (employment) without an equivalent increase in consumption, due to a deterioration in the terms of trade and the accumulation of net external assets. The rest of the paper is organised as follows: In Section 2, we present the model. In Section 3, we analyse the welfare effects of an unexpected shock to the domestic money supply, using illustrative numerical simulations. Section 4 concludes the paper.
نتیجه گیری انگلیسی
In this paper, we examined the question of whether an expansionary monetary policy is beggar-thy-neighbour or beggar-thyself, within the context of a standard open-economy model with imperfect competition and nominal rigidities. Prior research has shed light only on the discounted present value of welfare, an approach which misses the potentially important time dimension. It has shown that the cross-country substitutability is a key parameter governing the international welfare effects of monetary policy. Using a more advanced method for welfare analysis, we show that, in the short-run, such a policy is beggar-thyself, and that this result does not depend on the size of the cross-country substitutability. In the rest of the world, welfare increases in the short-run, while long-run effects depend on the cross-country substitutability both at home and abroad. Superficially, one could conclude that the recent expansionary monetary policies of the U.S. Federal Reserve and the European Central Bank can be expected to increase welfare only after some time. However, this policy stance was a reaction to a severe recession, whereas our results are based on the assumption of full employment. Therefore, a crucial assumption for the welfare criterion employed is that monopolistic competition and price rigidities are the only distortions. Extending the model to allow for involuntary unemployment due to labour market inefficiencies would be an interesting extension, and is left for future research.