In this paper, we reconsider the question how monetary policy influences exchange rate dynamics. To this end, a vector autoregressive (VAR) model is combined with a two-country dynamic stochastic general equilibrium (DSGE) model. Instead of focusing exclusively on how monetary policy shocks...

Applications in modern macroeconomics increasingly require non-linear solution methods. Our paper studies the consequences of the widely used Calvo pricing mechanism in a non-linear world. We introduce the concept of the stability region as a non-linear counterpart to the determinacy region. We...