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This study shows that the learning by doing ( LBD ) effect has substantial, both quantitative and qualitative, consequences for the international transmission of monetary policy.
Learning by Devaluating: A Supply-Side Effect of Competitive Devaluation
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In this article, the learning by doing (LBD) effect has substantial, both quantitative and qualitative, consequences for the international transmission of monetary policy, and it is shown that LBD increases the harmful effect of competitive devaluation on foreign output by 85-125%.Abstract:
This study shows that the learning by doing (LBD) effect has substantial, both quantitative and qualitative, consequences for the international transmission of monetary policy. LDB implies that a country can increase its productivity-increasing skill level, at the expense of the neighbor, by competitive devaluation engineered through low interest rates. If measured by the cumulative change in output after 12 quarters, LBD increases the harmful effect of competitive devaluation on foreign output by 85–125%, when compared to the case without it. If LBD is sufficiently strong and the cross-country substitutability is high (low), it reverses the effect of monetary policy on foreign (domestic) welfare into negative (positive). Moreover, a combination of a high cross-country substitutability and a sufficiently strong LDB effect implies that competitive devaluation increases both domestic output and welfare, at the expense of foreign output and welfare.read more
Figures
Table 6: Varying the Key Parameters: The Discounted Present Value of the Change in Utility When 6 
Table 7: The Percentage Change in the Cumulative Change in Output Compared to the Case Without LDB When 5.1 
Table 8: Varying the Key Parameters: Discounted Present Value of the Change in Utility When 5.1 
Table 2: Discounted Present Value of the Changes in Utility When 6 
Figure 1: Dynamic Effects of a Domestic Interest Rate Shock When 6 
Figure 4: Effects of Varying Key Parameter Values When 6
Citations
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Journal ArticleDOI
Hysteresis and fiscal policy
Philipp Engler,Juha Tervala +1 more
TL;DR: In this article, the authors analyzed the implications of hysteresis for fiscal policy in a DSGE model and showed that the welfare multiplier is larger in the presence of hystresis.
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Goods Production, Learning by Doing, and Growth in a Region with Creative and Physical Capital
TL;DR: In this article, the effects of learning by doing resulting from the production of a final good on economic growth in a region that is creative in the sense of Richard Florida are studied.
Posted Content
Banks’ leverage behaviour in a two-agent New Keynesian model
Andrea Boitani,Chiara Punzo +1 more
TL;DR: In this paper, the authors show that the level of banks leverage, which may be imposed by banks regulation, affects the steady state level of output, employment and consumption, as might be expected in a non-Modigliani-Miller world.
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Industry trade and exchange-rate fluctuations: Evidence from the U.S. and Chile
TL;DR: This article examined the United States' trade balance with Chile, both at the aggregate level and for 49 individual industries, and found that most effects concentrated among certain manufactures, with agricultural products and raw materials responding less to currency movements than do other commodities.
Journal ArticleDOI
Hysteresis and the welfare costs of recessions
TL;DR: This article showed that the welfare costs of recessions are huge (negligible) in the New Keynesian model with (without) hysteresis and showed that an empirically observed degree of hystresis increases the welfare cost of a recession by a factor of 121.
References
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Book
The competitive advantage of nations
TL;DR: The Need for a New Paradigm as discussed by the authors is the need for a new paradigm for the competitive advantage of companies in global industries, as well as the dynamics of national competitive advantage.
Journal ArticleDOI
Staggered prices in a utility-maximizing framework
TL;DR: In this article, the authors developed a model of staggered prices along the lines of Phelps (1978) and Taylor (1979, 1980), but utilizing an analytically more tractable price-setting technology.
Journal ArticleDOI
Discretion versus policy rules in practice
TL;DR: In this article, the authors examine how recent econometric policy evaluation research on monetary policy rules can be applied in a practical policymaking environment, and the discussion centers around a hypothetical but representative policy rule much like that advocated in recent research.