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Title: The Simple Geometry of Transmission and Stabilization in Closed and Open Economies

Author(s): Giancarlo Corsetti and Paolo Pesenti

Publication Date: May 2005

Keyword(s): exchange rate pass-through, international cooperation, nominal rigidities and optimal monetary policy

Programme Area(s): International Macroeconomics

Abstract: This paper provides an introduction to the recent literature on macroeconomic stabilization in closed and open economies. We present a stylized theoretical framework, and illustrate its main properties with the help of an intuitive graphical apparatus. Among the issues we discuss: optimal monetary policy and the welfare gains from macroeconomic stabilization; international transmission of real and monetary shocks and the role of exchange rate pass-through; the design of optimal exchange rate regimes and monetary coordination among interdependent economies.

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Bibliographic Reference

Corsetti, G and Pesenti, P. 2005. 'The Simple Geometry of Transmission and Stabilization in Closed and Open Economies'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5080