We study the conduct of monetary policy in a continuum of small open economies. We solve the model globally in closed form without restricting the elasticity of substitution between home and foreign goods to one. Using this global closed-form solution, we give an exact characterization of...

We study the conduct of monetary policy in a continuum of small open economies and obtain a novel closed-form solution that does not restrict the elasticity of substitution between home and foreign goods to one. We give an exact characterization of optimal monetary policy and welfare with and...

This paper evaluates the welfare implications of policy rules when international financial markets are incomplete. Using a two-country dynamic general equilibrium model with incomplete markets, price stickiness and monopolistic competition, one finds that an allocation in which the producer...

The actions by the European Central Bank (ECB) during the global and European crises have triggered a highly controversial debate, in particular in Germany, about the costs and benefits of the chosen policy path. The paper reviews, compares and evaluates the different arguments made in favour...

Monetary policy has an important role in the determination of the inflation rate and the output gap time trajectories. Monetary authorities should choose the nominal interest rate time path that best serves the goals of price stability (primarily) and output growth (as a consequence of the...