The existing literature on the stabilizing properties of interest-rate feedback rules has stressed the perils of linking interest rates to forecasts of future inflation. Such rules have been found to give rise to aggregate fluctuations due to self-fulfilling expectations. In response to this...

This paper studies how a rise in China's share of U.S. imports could lower pass-through of exchange rates to U.S. import prices. We develop a theoretical model with variable markups showing that the presence of exports from a country with a fixed exchange rate could alter the competitive...

The COVID-19 pandemic spawned a global liquidity crisis in March 2020. The global liquidity crisis was alleviated by the Federal Reserve and other advanced country central banks cooperating by extending the swap lines they developed in the Global Financial Crisis 2007-2008. Central bank...

In recent years, the theory of rules and discretion in monetary policy has fascinated scores of academic economists and policymakers alike. This paper asks whether it can be applied to understand the history of the world monetary system, by focusing on the setup and the experience of the Bretton...

This paper discusses what recent economic research tells us about exchange rate pass-through and what this suggests for the control of monetary policy. It first focuses on exchange rate pass-through from a macroeconomic perspective and then examines the microeconomic evidence. In light of this...

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...

We use detailed data for Iceland to examine two often-neglected aspects of the "exchange rate pass-through" problem. First, we investigate whether the pass-through coefficient varies with the degree of "international tradability" of goods. Second, we analyze if the pass-through coefficient...

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...

We investigate the choice of exchange-rate regime fixed or floating in a dynamic, intertemporal general equilibrium framework. Our framework extends Devereux and Engel (1998) by investigating the implications of internationalized production. We examine the role of price-setting -- whether prices...

A dynamic general equilibrium model of a small open economy is presented where agents may choose the frequency of price changes. A fixed exchange rate is compared to inflation targeting and money targeting. A fixed rate generates more price flexibility than the other regimes when the expenditure...