Publication

This paper analyzes the consequences of international capital mobility for the effects of monetary policy in open economies. The author shows that the difference between the short-run output effects of monetary policy shocks decreases if households have a home-product bias in preferences. This applies to both a world of high capital mobility and one of low capital mobility and thus implies that the empirically observed integration of international financial markets need not result in a significant change in the propagation of monetary policy shocks if households have a strong bias for consuming home products.