Optimal Monetary Policy in Small Open Economies: Producer Currency Pricing

Monetary Policy and Unemployment in Open Economies

After an expansionary monetary policy shock employment increases and unemployment falls. In standard New Keynesian models the fall in aggregate unemployment does not a¤ect employed workers at all. However, Lüchinger, Meier and Stutzer (2010) found that the risk of unemployment negatively a¤ects utility of employed workers: An increases in aggregate unemployment decreases workers’subjective well...

State-Dependent Pricing and Optimal Monetary Policy

Abstract: This paper analyzes optimal monetary policy under precommitment in a state-dependent pricing (SDP) environment. Under SDP, monopolistically competitive firms are allowed to endogenously change the timing of price adjustments. I show that this endogenous timing of price adjustment alters the tradeoff and the cost of inflation variation faced by the monetary authority in comparison to t...

Vehicle currency pricing and its positive welfare consequences under optimal monetary policy

Using a two-country general equilibrium model, this paper analytically derives the possibility of positive welfare consequences of vehicle currency use in invoicing international trades. Such vehicle currency use is prominent in the data. The literature points out welfare loss under optimal monetary policy due to vehicle currency pricing relative to the flexible price equilibrium outcome, model...

Oil Price Shock and Optimal Monetary Policy in a Model of Small Open Oil Exporting Economy - Case of Iran

Oil price shocks are the main source of macroeconomic fluctuations in oil exporting countries. It is believed that appropriate monetary policy can help to stabilize these unwanted variations toward optimal allocations. A stochastic dynamic general equilibrium model featuring the properties of both cost push and wealth effect transmission channels is developed for the Iranian economy. In thi...

Monetary Policy, Currency Unions and Open Economy Macrodynamics