A two-country dynamic general-equilibrium model with imperfect competition and price stickiness is considered. This work shows the conditions under which price stability can implement the flexible-price allocation as a Nash equilibrium. This is possible if and only if both countries maintain a...

This paper provides first and second-order approximation methods for the solution of non-linear dynamic stochastic models in which the exogenous state variables follow conditionally-linear stochastic processes displaying time-varying risk. The first-order approximation is consistent with a...

A positive and normative evaluation of alternative monetary policy regimes is addressed in a two-country general equilibrium model. The behaviour of the exchange rate, as well as of the other macroeconomic variables, depends crucially on the monetary regime chosen, though not necessarily on...

This Paper presents a two-country dynamic general equilibrium model with imperfect competition and nominal price rigidities in which terms of trade shocks coexist with inefficient supply shocks. We analyse the features of the optimal cooperative solution. While terms of trade shocks should be...

The Great War of 1914-18 constituted a major rupture for the economies of Europe in several respects. It marked the end of almost a century of uninterrupted economic growth. It ended a long period of near-universal currency stability, and set in motion a painful process of de-globalisation. It...

Economic institutions encompassing increasingly sophisticated concepts of risk-sharing and liability flourished in Europe since the High Middle Ages. These innovations occurred in an environment of fragmented local jurisdictions, not within the framework of the territorial state. In this short...

International financial integration has greatly increased the scope for changes in a country’s net foreign asset position through the “valuation channel” of external adjustment, namely capital gains and losses on the country’s external assets and liabilities. We examine this valuation...