Monetary Policy, Trade Patterns, and Price Dispersion: The Role of Trade Costs

Abstract

This dissertation consists of three studies. Each study examines the role of trade costs for some facet of trade or finance, thus partly addressing a number of the Six Puzzles of International Economics highlighted by Obstfeld and Rogoff (2000). The first one studies inflation targeting by the Bank of Canada, in the context of a small open economy subject to trade costs. The second one develops a partial equilibrium trade model and estimates key trade and trade cost elasticities, previously not separately identified. The final one develops a general equilibrium trade model across cities with traded goods and a distribution sector in each city to explain price and wage dispersion.