This paper develops a welfare-based model of monetary policy in an open economy. We focus on the extent to which monetary policy should be employed in maintaining the exchange rate. The traditional approach maintains that exchange rate flexibility is desirable in the presence of real...

This report presents the summary results of purchasing power parities (PPP) in the 2011 International Comparison Program in Asia and the Pacific and background information on the concepts that underpin the results. The PPPs are disaggregated by major economic aggregates which enable robust...

This paper empirically investigates the effectiveness of monetary policy transmission in the Gulf Cooperation Council (GCC) countries using a structural vector autoregressive model. The results indicate that the interest rate and bank lending channels are relatively effective in influencing...

This paper investigates the quantitative importance of the expenditure-switching effect in three small open economies: Australia, Canada and the UK, by developing and estimating a structural sticky-price model nesting both producer currency pricing (PCP) and local currency pricing (LCP)...

In theory, nominal exchange rate movements can lead to “expenditure switching” when they generate changes in the relative prices of goods across countries. This paper explores whether the expenditure-switching role of exchange rates has changed in the current episode of significant global...

A two-country sticky-price general equilibrium model is used to examine the implications of the expenditure switching effect for the welfare properties of fixed and floating exchange rate regimes. A comparison between the two regimes shows that the volatility of consumption is unambiguously...

In this paper, the effects on export prices (in the currency of the exporter) of shocks to the exchange rate, the exporting firms' costs and foreign prices are investigated. The theoretical analysis is done with alternative assumptions regarding the currency in which prices are set and the...

By incorporating the factor of firms' asymmetric price setting behavior into the two-country model with vertical production and trade, we analyze how one country's monetary policy affects the welfare of both countries. We show that an expansionary monetary policy has (i) a beggar-thyself effect...

Several empirical studies have found that the exchange rate pass-through (ERPT) into import prices is not complete and declined during the 1990s. In this paper we carry out a reexamination of these findings using a unique database of disaggregated import prices both at the border and wholesale...

The macroeconomic policy response in India after the North Atlantic financial crisis (NAFC) was rapid. The overshooting of the stimulus and its gradual withdrawal sowed seeds for inflationary and BoP pressures and growth slowdown, then exacerbated by domestic policy bottlenecks and volatility in...