We study how real exchange rate dynamics are affected by monetary policy in dynamic, stochastic, general equilibrium, sticky-price models. Our analytical and quantitative results show that the source of interest rate persistence - policy inertia or persistent policy shocks - is key. When the...

This paper explores the consequences of extremely low real interest rates in a world with integrated but heterogenous capital markets and nominal rigidities. We establish four main results: (i) Liquidity traps spread to the rest of the world through the current account, which we illustrate with...

We study how real exchange rate dynamics are affected by monetary policy in dynamic, stochastic, general equilibrium, sticky-price models. Our analytical and quantitative results show that the source of interest rate persistence - policy inertia or persistent policy shocks - is key. In the...

During emerging market crises, domestic agents might have sufficient collateral to borrow from the other domestic agents, but they are unable to borrow from foreigners because the country, as a whole, lacks international collateral. In this setting, we show that an (ex-post) optimizing central...

Conventional wisdom holds that monetary policy in emerging economies is procyclical, unlike in advanced economies. Using a large sample of countries from the mid-1990s onwards, we show that the conduct of monetary policy is not fundamentally different across these two groups of countries....

We study the effects of an anticipated dollarization, announced today but planned to be implemented at some future date, in a simple open-economy model. Motivated by the profile of countries considering dollarization we make the following assumptions. First, the government faces a scarcity of...

Over the past 15 years there has been remarkable progress in the specification and estimation of dynamic stochastic general equilibrium (DSGE) models. Central banks in developed and emerging market economies have become increasingly interested in their usefulness for policy analysis and...

Over the past 15 years there has been remarkable progress in the specification and estimation of dynamic stochastic general equilibrium (DSGE) models. Central banks in developed and emerging market economies have become increasingly interested in their usefulness for policy analysis and...

We use a structural VAR with sign restrictions to jointly identify the impact of monetary policy, private absorption, technology and oil price shocks on current account fluctuations in the U.S.. We derive the sign restrictions from theoretical impulse response functions of a DSGE model with oil,...

We study the design of optimal monetary policy (Ramsey policies) in a model with sticky prices and unionized labour markets. Collective wage bargaining and unions monopoly power tend to dampen wage fluctuations and to amplify employment fluctuations relatively to a DNK model with walrasian...