Alternative price-setting regimes in open-economy models that incorporate nominal price rigidities and monopolistic competition have distinct implications for the mechanism transmitting shocks across countries. Recent research in this field has proceeded under one of two assumptions:...

The authors show that standard alternative assumptions about the currency in which firms price export goods are virtually inconsequential for the properties of aggregate variables, other than the terms of trade, in a quantitative open-economy model. This result is in contrast to a large...