International Monetary Policy Analysis with Durable Goods
Abstract
The dissertation studies a model of an economy which produces and exports
durable goods. It analyzes the optimal monetary policy for such a country.
Generally, monetary policy has a bigger economic effect on durable goods relative to
non-durable goods because durable goods can be stored and households get utility from
the stock of durable goods. This dissertation shows that, in Nash equilibrium, the central
bank of a durable goods producing country can control changes of the price level with
smaller changes in the monetary policy instrument. In the cooperative equilibrium, the
monetary authority of the country which imports non-durable goods and exports durable
goods should raise the interest rate by more, relative to the Nash case, in response to a
rise in foreign inflation. On the other hand, the monetary authority of the country which
imports durable goods and exports non-durable goods should raise the interest rate by
less than the other country.
Citation
Lee, Kang Koo (2009). International Monetary Policy Analysis with Durable Goods. Doctoral dissertation, Texas A&M University. Available electronically from https : / /hdl .handle .net /1969 .1 /ETD -TAMU -2009 -08 -7137.