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Monetary Policy in the Open Economy Revisited : Price Setting and Exchange Rate Flexibility

Devereux, Michael B. - 2000

This paper develops a welfare-based model of monetary policy in an open economy. We focus on the extent to which monetary policy should be employed in maintaining the exchange rate. The traditional approach maintains that exchange rate flexibility is desirable in the presence of real...

Persistent link: https://www.econbiz.de/10012471102

Capital Controls, Global Liquidity Traps and the International Policy Trilemma

Devereux, Michael B. - 2013

The 'International Policy Trilemma' refers to the constraint on independent monetary policy that is forced on a country which remains open to international financial markets and simultaneously pursues an exchange rate target. This paper shows that, in a global economy with open financial...

Persistent link: https://www.econbiz.de/10012459570

Consumption Heterogeneity and Monetary Policy in an Open Economy

Chen, Sihao; Devereux, Michael B.; Shi, Kang; Xu, Jenny - National Bureau of Economic Research - 2022

We explore how consumption heterogeneity affects the international transmission mechanism of monetary shocks and the choice of optimal monetary policy in an open economy. Incorporating two types of agents (Ricardian versus Keynesian) into a standard open economy macro model, we find that there...

Persistent link: https://www.econbiz.de/10013172135

Exchange Rate Dynamics with Sticky Prices : The Deutsch Mark, 1974-1982

Giovannini, Alberto - 1984

This paper estimates simultaneously dynamic equations for the Deutsche Mark/Dollar exchange rate and the German wholesale price index, which emerge from a model in which German prices are sticky. This stickiness is due to price adjustment costs which take the form posited by Rotemberg(1982).The...

Persistent link: https://www.econbiz.de/10012477815

Customer Anger at Price Increases, Time Variation in the Frequency of Price Changes and Monetary Policy

Rotemberg, Julio J. - 2002

While much evidence suggests tha price rigidity is due to a concern with the reaction of customers, price increases do not seem to be typically associated with drastic reduction in purchases. To explain this apparent inconsistency, this paper develops a model where consumers care about the...

Persistent link: https://www.econbiz.de/10012469386

Interest-Rate Rules in an Estimated Sticky Price Model

Rotemberg, Julio J. - 1998

This paper evaluates alternative rules by which the Fed may set interest rates using the small model of the U.S. economy estimated in Rotemberg and Woodford (1997). Our main substantive finding is that low and stable inflation together with stable interest rates can be achieved by letting the...

Persistent link: https://www.econbiz.de/10012472193

Globalisation, Pass-through and the Optimal Policy Response to Exchange Rates

Devereux, Michael B. - 2014

In this paper we examine how monetary policy should respond to nominal exchange rates in a New Keynesian open economy model that allows for a non-trivial role for sterilised intervention. The paper develops the argument against the backdrop of the evolving policy-making environment of Asian...

Persistent link: https://www.econbiz.de/10012458414

Trade Wars and the Optimal Design of Monetary Rules

Auray, Stéphane; Devereux, Michael B.; Eyquem, Aurélien - National Bureau of Economic Research - 2024

Monetary rules may have a large effect on the outcome of trade wars if central banks target the CPI inflation rate or more generally changes in the relative price of traded goods. We lay out a two-country open-economy model with sticky prices where countries engage in trade wars. In the presence...

Persistent link: https://www.econbiz.de/10014544729

Sharing the Burden : Monetary and Fiscal Responses to a World Liquidity Trap

Cook, David - 2011

choices that maximize the joint welfare of all countries following such a shock, when governments cooperate on both fiscal and … monetary policy. Adjusting to a large negative demand shock requires raising world aggregate demand, as well as redirecting … respond perversely. A negative shock causes an appreciation of the home terms of trade, exacerbating the slump in the home …

Persistent link: https://www.econbiz.de/10012461527