How does trade fragmentation affect inflationary pressures? What is the response of monetary policy needed to sustain inflation at target? To address these questions, we develop a two-sector, small open-economy model featuring imperfect international risk-sharing and household heterogeneity, capturing both the supply-side and demand side effects of fragmentation. In the model, fragmentation takes the form of import-price increases or a decline in tradable-sector productivity. The sign and

Tag-uri: Inflatie