For the open economy the workhorse model in intermediate textbooks still is the Mundell-Fleming model, which basically extends the IS-LM model to open economy problems. The purpose of this paper is to present a simple New Keynesian model of the open economy, that introduces open economy...

Over the last decade a new consensus model has emerged in monetary macroeconomics, labelled New Keynesian macroeconomics (Clarida et al., 1999). It consists of three simple building blocs: a forward-looking IS-equation that is derived from the optimization problem of a representative household,...

While the IS/LM-AS/AD model is still the central tool of macroeconomic teaching it has been criticised by several economists. The model is unable to deal with a monetary policy that uses the interest rate as its operating target ( Romer [2000]). Walsh [2002] has criticised that it is not suited...

This paper estimates forward-looking Taylor rules for the euro area. Using the asymmetries in inflation and cyclical output developments across countries, we investigate the adequacy of the single monetary policy for each of the EuropeanMonetary Union (EMU) member countries. Notable differences...