Gertler, Mark; Svensson, Lars E.O.; Ferrero, Andrea - National Bureau of Economic Research (NBER) - 2008
We explore the implications of current account adjustment for monetary policy within a simple two-country DSGE model. Our framework nests Obstfeld and Rogoff's (2005) static model of exchange rate responsiveness to current account reversals. It extends this approach by endogenizing the dynamic...