Greater openness has become an almost universal feature of modern, developed economies. This paper develops a workhorse international model, and explores the role of standard monetary policy rules applied to an open economy. For this purpose, I build a two-country DSGE model with monopolistic...

John Taylor and David Romer champion an approach to teaching undergraduate macroeconomics that dispenses with the LM half of the IS-LM model and replaces it with a rule for setting the interest rate as a function of inflation and the output gap - i.e., a Taylor rule. But the IS curve is...

In the classical macroeconomic models constructed by Lucas (1972, 1975) and Barro (1976), monetary aggregates are assumed to be generated by a logarithmic random walk. This specification implies that all monetary growth is (a) unanticipated and (b) permanent.

We investigate the roles of a time-varying inflation target and monetary and fiscal policy stances on the dynamics of inflation in a DSGE model. Under an active monetary and passive fiscal policy regime, inflation closely follows the path of the inflation target and a stronger reaction of...