Bulletin n. 1/2012 | ||
June 2012 | ||
Cheng Wenli, Zhang Dingsheng |
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International Transmission of Monetary Shocks and the Non-neutrality of International Money | ||
in Review of International Economics , Volume 20, Issue 1, February 2012 , 2012 , 134-149 | ||
Monetary shocks and how they are transmitted internationally are investigated in this paper. The paper shows that where a national currency is used as an international medium of exchange, the international money is non-neutral. In particular, an increase in the supply of the international money leads to a transfer of real resources to the international money-issuing country from its trading partner. It also induces an expansion of the nontradable sector in the international money-issuing country, and an expansion of the tradable sector in its trading partner. The real impact of a monetary shock is greater under a fixed exchange rate system than under a flexible exchange rate system. | ||