European Parliament Library

Financial Globalization and Monetary Policy, Michael Devereux, Alan Sutherland

What does financial globalization imply for the design of monetary policy? Does the case for price stability change in an environment of large cross country gross asset holdings?. This paper is concerned with the effects of monetary policy under endogenous international portfolio choice and incomplete markets. With endogenous portfolios, monetary policy takes on new importance due to its impact on the distribution of returns on nominal assets. Surprisingly, we find an even stronger case for price stability in this environment. Even without nominal rigidities, price stability has a welfare benefit by enhancing the risk sharing capacity of nominal bond returns
Table Of Contents
Contents; I. Introduction; II. An Open Economy Macro Model; A. Consumers; B. Firms; C. Monetary Authorities; D. The Menu of Assets; E. Goods Market Clearing; F. Foreign Economy; III. Solving the Model; A. Asset Market Solution; B. Linear Approximation to the Rest of the Model; C. Construction of the Equilibrium Portfolios; IV. Equilibrium Portfolios Under Alternative Asset Market Configurations; A. Optimal Portfolios; B. The NB Economy; C. The NBE Economy; D. Portfolio Holdings and Monetary Policy; V. Risk-Sharing and Portfolio Holdings; VI. Capital Flows and Exchange Rate Volatility
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (34 p.)
Specific Material Designation
Form Of Item

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