THE PRICE EFFECTS OF MONETARY CHANGES - THE CASE OF A SMALL OPEN-ECONOMY

It has been proposed that a change in the money supply has different effects on the traded and non-traded goods sectors due to the existence of separate flexible and fixed price markets. This has important implications because of the consequent real effects on production decisions and producer incomes within the various flexible and fixed price markets. The purpose of this paper is to examine the effects of monetary changes on prices of traded and non-traded goods and to discuss the implications of this for Australia and other similar small open economies. © 1991.