The empirical evidence on the role of trade openness in the monetary transmission is not conclusive: some studies find that it increases the sensitivity of output to monetary shocks, others find that it does not. Using a New Keynesian open economy model, I show that the role of trade openness in...

We introduce equilibrium indeterminacy into a two-country incomplete asset model with imperfect competition and analyze whether self-fulfilling, belief-driven fluctuations (i.e., sunspot shocks) can help resolve the major puzzles of international business cycles. We find that a combination of...