| Production Relocation and the Effect of Monetary Policy |
Hiroyuki Nishiyama, |
| Kinki University |
| Copyright ©2005 The Journal of Economic Integration |
| ABSTRACT |
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This paper analyzes the macroeconomic effect of production relocation by using an open economy macroeconomic model. Our analysis shows, paradoxically, that acceleration in production relocation might have an expansive effect on the home economy. We also show that monetary expansion has welfare-enhancing effects even in an economy where production relocation exists. However, advancing production relocation amplifies the effect of monetary policy on the exchange rate. On the other hand, it reduces the effect on the relative home income by advancing production relocation. JEL Classification: F23, F41, F42 |
| Keywords:
Monetary policy | Production relocation | Hollowing out | Beggar-thy-neighbor
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