Money, Interest, Prices and Capital Flowsf
نویسندگان
چکیده
In this paper we develop the first search-theoretic monetary model of a two-country global economy. We show the connection between deep monetary frictions (i.e. search and matching frictions), capital holdup externalities, and the realization of an endogenous departure from the “excess smoothness” problem in the real exchange rate found in standard models. Using this alternative monetary model, we revisit the international monetary policy implications on the real exchange rate and output. JEL CODES: E31; E32; E43; E44
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