On the trade balance response to monetary shocks: the Marshall-Lerner conditions reconsidered

This paper shows that, by disentangling the degree of monopolistic distortion from the elasticity of substitution between domestic and im-ported goods, we can obtain a negative response of the trade balance to positive monetary shocks, without introducing capital accumula-tion. This result could reconcile the class of models à la Obstfeld and Rogoff (1996, ch. 10) with the stylized fact of counter-cyclical trade balances.

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Authors:	Lombardo, Giovanni
Institutions:	Department of Economics and Related Studies, University of York
Subject:	trade balance \| Marshall-Lerner conditions \| elasticity of substitution \| monetary shocks \| transfer problem

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Extent:	application/pdf
Series:	Discussion Papers.
Type of publication:	Book / Working Paper
Language:	English
Classification:	C6 - Mathematical Methods and Programming ; E3 - Prices, Business Fluctuations, and Cycles ; E4 - Money and Interest Rates
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005523984