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Monetary and Exchange Rate Policy in Multisectorial Economies

Author

Listed:
  • Habib Ahmed

    (National University of Singapore)

  • Stephen M. Miller

    (University of Connecticut)

Abstract

We develop a two-sector economy where each sector is classified as classical/Keynesian (contract/noncontract) in the labor market and traded/nontraded in the product market. We consider the effects of changes in monetary and exchange rate policy on sectoral and aggregate prices and outputs for different sectoral characterizations. Duca (1987) shows that nominal wage rigidity facilitates the effectiveness of monetary policy even in the classical sector. We demonstrate that trade price rigidity provides a similar path for the effectiveness of monetary policy, in this case, even when both sectors are classical.

Suggested Citation

  • Habib Ahmed & Stephen M. Miller, 1996. "Monetary and Exchange Rate Policy in Multisectorial Economies," Working papers 1996-11, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:1996-11
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    References listed on IDEAS

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    Cited by:

    1. Georgios Chortareas & Stephen Miller, 2004. "Optimal Central Banker Contracts and Common Agency," Public Choice, Springer, vol. 121(1), pages 131-155, October.

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