TY  - JOUR
AU  - Svensson,Lars E.O.
AU  - Wijnbergen,Sweder van
TI  - Excess Capacity, Monopolistic Competition, and International            Transmission of Monetary Disturbances
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2262
PY  - 1990
Y2  - July 1990
UR  - http://www.nber.org/papers/w2262
L1  - http://www.nber.org/papers/w2262.pdf
N1  - Author contact info:
Lars E.O. Svensson
Sveriges Riksbank
SE-103 37 Stockholm
SWEDEN
Tel: +46 8 787 0107
Fax: +46 8 21 0531
E-Mail: lars.svensson@iies.su.se

Sweder van Wijnbergen
E-Mail: svw.heas@planet.nl
AB  - A stochastic two-country neoclassical rational expectations model with sticky prices -- optimally set by monopolistically competitive firms -- and possible excess capacity is developed to examine international spillover effects on output of monetary disturbances. The Mundell-Fleming model predicts that monetary expansion at home leads to recession abroad. In contrast, our main result is that spillover effects of monetary policy may be either positive or negative, depending upon whether the intertemporal elasticity of substitution in consumption exceeds the intratemporal elasticity of substitution. The model in addition is used to determine nominal and real interest rates, exchange rates, and other asset prices.
ER  -