Trade fragmentation, inflationary pressures and

2025

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AI-generated summary

1) This paper analyzes how trade fragmentation impacts inflation and the appropriate monetary policy response, considering both supply and demand effects in a heterogeneous agent model.
2) * Explores the effects of trade fragmentation on inflation and monetary policy.
* Develops a two-sector, small open-economy model with household heterogeneity.
* Simulates three fragmentation scenarios: gradual import price increases, front-loaded import price increases, and tradable sector productivity shocks.
3) Trade fragmentation, inflation, monetary policy, open economies, household heterogeneity

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