Document Type

Article

Publication Date

4-1995

Source Publication

Journal of International Money and Finance

Abstract

Most nations have experienced 'base drift' of their money stocks and associated price-level non-trend-stationarities. Recent explanations for this fact have emphasized tensions among various possible objectives of central banks in closed-economy or small-open-economy frameworks. In contrast, this paper explores structural and policy interdependence among economies as an explanation for price-level non-trend-stationarities. It demonstrates that such interdependence can induce central banks to follow non-trend-stationary policies even if they desire only to smooth prices in their home economies.

Comments

Originally published in Journal of International Money and Finance, Volume 14, No. 2 (April 1995), DOI: 10.1016/0261-5606(94)00003-J.