This paper reviews the effectiveness of unconventional monetary policies and their relevance for emerging markets. Such policies may be useful either when interbank rates fall to zero, or when a credit crunch or rise in risk premium impairs the normal transmission mechanism of monetary policy....

We study cooperative and non-cooperative fiscal policy in an open economy model where cross-country risk sharing is imperfect and countries face terms of trade externalities. We show that the optimal form of fiscal cooperation, or fiscal union, is defined by one parameter: the Armington...

This paper estimates a small open economy New-Keynesian model using data from Australia and the US economy with Full Information Maximum Likelihood method. Our estimated US structural parameters are in line with those of Giordani (2004) on Canadian data. For Australian parameters we find that...

The paper studies the determinants of unemployment in a two-country model, where real wages are the outcome of the strategic interaction between various institutional players (firms, unions, central banks). We show that: (i) the results derived in the recent literature on this topic are not...

In this paper we introduce the cost channel of monetary policy (e.g., Ravenna and Walsh, 2006) into an otherwise standard New Keynesian model of a two-country monetary union, which is being hit by aggregate, asymmetric and idiosyncratic shocks. The single central bank implements the optimal...

This paper explores how real dollarization (dollar indexing of wages), financial dollarization (dollar denomination of financial contracts), and monetary policy interact in a general equilibrium, new open-economy macroeconomics model with real shocks. Real dollarization is avoided as long as the...

This paper studies a small open economy with two sectors. In a perfect foresight, rational expectation general equilibrium model, with sticky prices in the non-traded goods sector, the current account responses to monetary shocks depend on the elasticity of substitution between consumption and...

Most New Keynesian models are derived under the assumption that inflation is equal to zero in the steady-state and yet most central banks around the world have inflation targets that are greater than such a number. In this paper we consider the open economy (welfare) implications of non-zero...