وابستگی متقابل و رفاه اثرات بین المللی از سیاست های پولی

A vertical chain of production and trade along this chain have been found to be a characteristic feature of globalized markets. This paper examines how a multistage production process that involves more than one country affects the transmission of monetary policy changes. We assume that imported and domestic inputs are required to produce final consumption goods. Monetary policy may have adverse beggar-thyself effects if the mutual dependence between countries is considerably high. The foreign country benefits from a home monetary expansion unless the competitiveness of markets is too low.

A central issue in international macroeconomics is the welfare effects of monetary policy. What the welfare consequences for domestic agents are, and how monetary adjustments are transmitted to other economies, are key questions in this respect. The conventional wisdom that an expansionary monetary policy is beneficial for the expanding country and detrimental for the rest of the world has been questioned and qualified in recent theoretical work by Obstfeld & Rogoff, 1995 and Obstfeld & Rogoff, 1996. In their studies, an expansionary monetary policy anywhere in the world benefits all countries equally. Monetary policy thus does not generate the familiar beggar-thy-neighbor effects but rather, prosper-thy-neighbor effects. Several papers have since modified the Obstfeld and Rogoff framework through the consideration of, e.g., nontraded goods (Hau, 2000), a limited pass-through of exchange rate changes (Betts & Devereux, 1996 and Betts & Devereux, 2000), different degrees of substitutability between varieties of home goods and between domestic and foreign goods (Corsetti & Pesenti, 2001a and Tille, 2001), a home bias (Michaelis, 2002 and Warnock, 2003) and a production process consisting of more than one stage (e.g., Obstfeld, 2001 and Tille, 2000). Beggar-thy-neighbor effects reappear in a number of these models. Even the possibility of a detrimental beggar-thyself effect for the expanding country emerges (see, e.g., Tille, 2001). Starting from the controversial welfare results that have been obtained in new open economy macroeconomics (NOEM) models, this paper seeks to reexamine the welfare effects of monetary policy by accounting for one of the most important changes in the nature of international trade (Hummels et al., 2001 and Yi, 2003). The production sequence of final consumption goods stretches across many countries and is increasingly associated with vertical trade. Goods are produced in a vertical production chain that involves cross-border trade in inputs. In the light of these changes, the interdependence of countries is increasingly based on trade along vertical production chains. We suppose that each country produces a continuum of differentiated intermediate and final consumption goods. The intermediate goods are not directly consumed but used as inputs in the production of consumption goods. This set-up allows us to capture some important characteristics of global trade and production. Consumption goods are produced in sequential stages, more than one country provides value-added in the production process and at least one stage involves the use of imported input goods.1 Furthermore, a home bias in the production of consumption goods is introduced.2 If a home bias in production exists, domestic firms use relatively more home inputs than foreign firms. Hence, the willingness to substitute domestic for imported input goods in response to terms of trade changes declines. Thus we are able to vary the mutual interdependence of economies on the production side. In addition, another variable determining the economies' interdependence is explicitly considered. The substitutability of inputs in the production processes (reflecting the competitiveness of markets) also affects the welfare changes in the aftermath of a monetary policy change. By deviating from the standard NOEM approach through the consideration of trade in inputs and merging some of the extensions found in the literature into a unified framework, we are able to contrast critical factors that pull the welfare results in opposite directions. The model's main results can be summarized as follows. Generally, the impact of a home monetary policy change is not unambiguous for either the home or the foreign country. An expansionary monetary policy is more likely to be beneficial for the expanding country (prosper-thyself) the less open the economy is and the less dependent the economy is on inputs from abroad. Moreover, the more competitive markets are (i.e., the greater the substitutability between home and foreign goods), the more likely is a prosper-thyself effect of monetary policy. A detrimental effect of an expansionary monetary policy on the expanding country's welfare (beggar-thyself) is possible for a relatively open economy that is strongly linked to the rest of the world. Comparatively large monopolistic distortions increase the probability of an adverse beggar-thyself effect. The rest of the world most likely benefits from a home monetary expansion (prosper-thy-neighbor). Only in the case of a high degree of substitutability between home and foreign goods does the familiar beggar-thy-neighbor effect become possible. Several other papers also examine the effects of monetary policy when the production process encompasses more than one stage. Obstfeld (2001) points out in an early contribution that sourcing decisions by firms are to be considered as a major channel through which exchange rate movements influence trade flows and, hence, aggregate demand. Since demand is redirected on the intermediate goods level, a zero pass-through on the consumption goods level does not imply that an economy is insulated from exchange rate changes.3 Most recently, Huang and Liu (2004) and Devereux and Engel (2004) consider a vertical production chain in stochastic NOEM models. Huang and Liu (2004) argue that the empirically documented increase in production interconnectedness tends to make a monetary expansion beneficial for both the expanding country and the rest of the world. Since a multistage production process with monopolistic distortions at each stage implies that inefficiencies multiply, the efficiency improvement that can be achieved through a monetary expansion magnifies, too. The negative terms of trade effect of an expansionary monetary policy is therefore more likely to be dominated than in a model without production in sequential stages. Devereux and Engel (2004) focus on the optimal variability of the exchange rate when there is a conflict between achieving risk sharing in consumption and allowing for terms of trade adjustments. In their model, all trade is in intermediate goods; that is, consumption goods are nontradables. Movements of the nominal exchange rate that enable an efficient adjustment of the terms of trade may cause inefficient changes in the real exchange rate in this setting so that full consumption risk sharing across countries cannot be attained. Corsetti and Dedola (2003) and Tille (2000) adopt another approach to model a multistage production process. In their papers, imported goods are not sold directly to consumers by their producers but by retail firms. Corsetti and Dedola (2003) show that vertical links that may differ across markets allow for an endogenous derivation of an incomplete pass-through and of deviations from the law of one price. Tille (2000) points out that the welfare effects of monetary policy crucially depend on whether the firms that distribute the consumption goods are owned by home households or whether they are subsidiaries of foreign firms. The rest of the paper is organized as follows. In the next section, the model is developed. Section 3 presents the closed form solutions and Section 4 is devoted to the welfare analysis of monetary policy. The effects of money supply changes on home and foreign welfare are derived and a numerical example is presented. Section 5 concludes.

5. Conclusion A vertical chain of production and trade along this chain has been found to be a characteristic feature of globalized markets. Starting from this stylized fact, this paper examines how a multistage production process that involves more than one country affects the transmission of monetary policy changes. We assume that imported and domestic inputs are required to produce final consumption goods. Further, a home bias in the production of final consumption goods may exist in the world. Hence, the strength of the vertical links between countries may vary in dependence on this bias. Keys for the model's results are the degree of vertical interdependence and the competitiveness of markets. A monetary expansion is more likely to have a beneficial effect for the expanding country, the weaker the cross-country links are. Hence, monetary policy has prosper-thyself effects if only a small fraction of the input goods are imported, making the country by and large independent of the rest of the world. Moreover, the likelihood of prosper-thyself effects increases with the competitiveness of markets. One is therefore led to the conclusion that a monetary expansions adversely affects the expanding country if the vertical links between countries are strong and/or the monopolistic distortions are quite strong. Concerning the welfare effects in the rest of the world, one can conclude that other economies are very rarely adversely affected by a monetary expansion in the home country. For a wide range of parameter values they even benefit. Beggar-thy-neighbor effects only occur for relatively competitive markets. There a many topics for further research based on the insights gained from our model. In particular in a stochastic version of the model, several interesting issues can be addressed. Optimal monetary policy in response to shocks and the model's implications for the international dimension of monetary policy could be explored as well as the model's implications for the international coordination of monetary policy (along the lines of, e.g., Benigno, 2001, Corsetti & Pesenti, 2001b, Obstfeld & Rogoff, 2002 and Sutherland, 2002).