This paper presents a new argument for international monetary policy coordination based on considerations of structural asymmetries across countries. In a two-country world with a traded and a non-traded sector in each country, optimal independent monetary policy cannot replicate the...

This article considers recent literature on optimal monetary policy in simple open-economy models. The presence of pricing to market, incomplete financial markets, and differences in preferences among households (in different countries) introduces some fundamental differences between closed- and...

This paper presents a new argument for international monetary policy coordination based on considerations of structural asymmetries across countries. In a two-country world with a traded and a non-traded sector in each country, optimal independent monetary policy cannot replicate the...

This paper proposes a channel through which increased openness to international trade can increase a country's long-run incentive to create inflation. The theoretical justifcation for this channel is the well known "beggar thy neighbor" incentive, and its dominance relies on a monetary...

This paper presents a new argument for international monetary policy coordination based on considerations of structural asymmetries across countries. In a two-country world with a traded and a non-traded sector in each country, optimal independent monetary policy cannot replicate the...

New EU member countries are supposed to adopt the Euro as soon as economic convergence is achieved. This paper analyzes the effects of joining a monetary union on output and inflation variability in small acceding countries. An asymmetric macroeconomic two-country model is specified and combined...

This paper uses a two-country, monetary general equilibrium model with imperfect competition to study the optimal rate of inflation in an open economy. In contrast with the closed economy literature, when policy is set non-cooperatively in the open economy, the optimality of the Friedman rule --...

This paper studies the national welfare maximizing inflation tax in an open economy with imperfect competition. It shows that the presence of a monopolistic distortion dampens the incentive to engage in strategic use of the inflation tax. If this dampening effect is strong enough, monetary...

A two-country model with monopolistic competition and price stickiness is employed to investigate the implications for macroeconomic stability and the welfare properties of three international policy arrangements: (a) cooperative, (b) non-cooperative and (c) monetary union. I characterize the...

This paper proposes a channel through which increased openness to international trade can increase a country’s long-run incentive to create inflation. The theoretical justification for this channel is the well known “beggar thy neighbor” incentive, and its dominance relies on a monetary...