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Abstract
This study examines the impact of a monetary shock on a two-country, asymmetrical size general equilibrium model. It is assumed that prices are sticky in the producer's currency, and find that the expenditure switching effect is not significant.
Acknowledgements
We are grateful to Christian Ahlin, Eric Bond, Carlos Borondo, Juin-jen Chang, Mario J. Crucini, Yih-ming Lin, Ping Wang and Diana Weymark for helpful comments and technical supports.
Notes
1 It is assumed that there is substitutability between home and foreign goods.
2 In Zimmermann (Citation1997), Switzerland is defined as a small country, the rest of Europe as its large neighbour. The second empirical portion has Canada as a small country, and the United States as the large neighbour.