DP5080 The Simple Geometry of Transmission and Stabilization in Closed and Open Economies
Author(s): | Giancarlo Corsetti, Paolo Pesenti |
Publication Date: | May 2005 |
Keyword(s): | exchange rate pass-through, international cooperation, nominal rigidities, optimal monetary policy |
JEL(s): | E31, E52, F42 |
Programme Areas: | International Macroeconomics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=5080 |
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.