International Pricing in New Open-Economy Models

FRB Richmond Economic Quarterly, Vol. 87, No. 4, Fall 2001, pp. 53-70

18 Pages Posted: 30 Nov 2012

See all articles by Margarida Duarte

Margarida Duarte

Federal Reserve Banks - Federal Reserve Bank of Richmond

Date Written: 2001

Abstract

Alternative price-setting regimes in open-economy models that incorporate nominal price rigidities and monopolistic competition have distinct implications for the mechanism transmitting shocks across countries. Recent research in this field has proceeded under one of two assumptions: producer-currency pricing or consumer-currency pricing. By determining the short-run effect of exchange rate changes on the relative price of imported to domestic goods, the currency of price setting effectively establishes the role of exchange rates in shifting consumer allocation decisions across countries. It follows that the international monetary transmission mechanism differs markedly under the two assumptions, implying different properties for many substantial issues in international economics.

Suggested Citation

Duarte, Margarida, International Pricing in New Open-Economy Models (2001). FRB Richmond Economic Quarterly, Vol. 87, No. 4, Fall 2001, pp. 53-70, Available at SSRN: https://ssrn.com/abstract=2182648

Margarida Duarte (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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