This paper examines the policy challenges a country faces when it wants to both reduce inflation and maintain a sustainable external position. Mundell's (1962) policy assignment framework suggests that these two goals may be mutually incompatible unless monetary and fiscal policies are properly...

Should monetary policy rule stabilize the exchange rate? In contrast to the conclusion from the optimal open-economy monetary policy literature, this papers show analytically, in a standard two-country new Keynesian model, that under monetary shocks and UIP shocks, stabilizing exchange rate in...

We examine the feasibility of international monetary policy coordination among the ASEAN-5 + 3 countries using the two-production-factor dynamic stochastic general equilibrium (DGSE) model. We explore three types of interaction regimes among these countries: “no coordination,” “bilateral...

I develop and analyze a DSGE model of a currency union to revise the question of how to conduct monetary and fiscal policy in countries that share the same currency. In contrast with the previous literature which assumes coordination, this paper analyzes the case where coordination lacks among...

I explore international monetary policy coordination and its welfare effects under a two-country macroeconomic model with the Zero Lower Bound (ZLB) on nominal interest rates in a floating exchange rate regime. Under the model, I find that monetary policy coordination does not improve total...

The welfare gains from international coordination of monetary policy are analysed in a two-country model with sticky prices. The gains from coordination are compared under two alternative structures for financial markets: financial autarky and risk sharing. The welfare gains from coordination...

This paper investigates the dynamic effects of monetary and fiscal policy in a monetary union, which is characterized by asymmetric interest rate transmission. This asymmetry gives rise to intertemporal reversals in the relative effectiveness of policy on member country outputs. The direction...

After decades using monetary aggregates as the main instrument of monetary policy and having different varieties of crawling peg exchange rate regimes, Colombia adopted a full-fledged inflation-targeting (IT) regime in 1999, with inflation as the nominal anchor, a floating exchange rate, and the...

After decades using monetary aggregates as the main instrument of monetary policy and having different varieties of crawling peg exchange rate regimes, Colombia adopted a full-fledged inflation-targeting (IT) regime in 1999, with inflation as the nominal anchor, a floating exchange rate, and the...