Kiel Working Papers, Kiel Institute for World Economics
No 1214:
On the Hump-Shaped Output Effect of Monetary Policy in an Open Economy
Christian Pierdzioch and Serkan Yener
Abstract: Results of empirical research have revealed a
characteristic hump-shaped effect of monetary policy shocks on output: the
effect builds to a peak after several months and then gradually dies out.
We analyze, in the context of a "new open economy macroeconomics" model,
factors that imply a hump-shaped effect of a monetary policy shock on
output. We find that a hump-shaped effect of output is likely to result if
the model features a "catching up with the Joneses" effect,
pricing-to-market behavior of firms, and imperfect international financial
market integration.
Keywords: Monetary policy; Catching up with the Joneses; Pricing-to-market; International financial markets; (follow links to similar papers)
JEL-Codes: F31,; F32,; F41; (follow links to similar papers)
20 pages, May 2004
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