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.