Abstract
Using an extended form of the New Open-Economy macroeconomics in this paper we find that, first, the expansionary home monetary policy increase the economic growth of home country; second, whether an expansionary monetary policy has a Beg-thy-neighbour or Benefits-thy-neighbour effect in open economy, depends on the ratio of the consumption growth and monetary growth in its economic structure; third, the appreciation of home currency has an positive home welfare effects. Given the assumption of one-period wage stickiness and the equilibrium conditions, the following conclusions can be obtained: the monetary policy can influence labour supply and thereby affecting the equilibrium of labour market in the short run; the spill over effects of monetary policy imply an important international transmission channel in terms of equilibrium relationship between home and foreign countries.
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