We investigate the importance of the behaviour of the monetary authority for the dynamics of a currency union where cross-country asymmetries are not necessarily reflected in differences in economic size. We construct a stylised two-country general equilibrium model with sticky-prices to serve...

This paper develops a model of a small open economy integrated in a monetary union. The model incorporates the standard nominal and real frictions in the literature. The parameters of the model are calibrated to the Portuguese data and the effects of the standard monetary policy shock are studied.

An "option-pricing" model is employed to analyse when a firm should expand its production capabilities abroad. In a framework where the firm's profits are determined by some average of the attractiveness of the home and foreign countries, and attractiveness in each country follows differentiated...