Year: 2005
Type: article
Abstract: This paper presents a two-country two-industry monetary model, with intermediate inputs and transport costs, which builds a bridge between the New Open Economy Macroeconomics and the New Economic Geography literatures.Endogenously asymmetric shocks arise in this model when the exchange rate regime in force fosters the concentration of each industry in one country, thus turning industry-specific shocks into country-specific shocks.Because of the conjunction of substitution and/or income effects, endogenously asymmetric demand shocks are found more likely to arise in a monetary union than under a flexible exchange rate regime.
Source: Journal of Economic Integration
Author: Olivier Loisel
Institutions: Centre de Recherche en Économie et Statistique, ENSAE Paris
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W2033739554