â â â â â â â  â â â  the excess liquidity of the open economy has become one main factor influencing the monetary markets, financial markets and even the whole macroeconomic. in era of the post-crisis, many countries have implemented the loose monetary policies, especially the quantitative easing policy in the u.s. which worsened the situation of the excess liquidity. under this background, it...

I study a dynamic economy featuring adverse selection in asset markets. Borrowingconstrained entrepreneurs sell past projects to finance new investment, but asymmetric information creates a lemons problem. I show that this friction is equivalent to a tax on financial transactions. The implicit tax rate responds to aggregate shocks, amplifying the response of the real economy and generating cycl...

abstract in this paper, the effect of foreign sector macro-variable on inflation dynamics and firms’ pricing behavior has been investigated in the context of a small open economy new keynesian phillips curve. this curve is derived and estimated for a developing oil-exporting economy suffering from dutch disease. this version of nkpc is an extension of leith and malley’s (2007) small open econom...

While invoicing currency has been extensively studied in open-economy macroeconomics, Dotsey and Duarte (2011) suggest that the currency denomination of exports does not matter because standard invoicing currency regimes such as producer currency pricing (PCP) and local currency pricing (LCP) generate similar aggregate responses. However, this paper demonstrates the importance of invoicing curr...

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...

In open-economy macroeconomics there is a monetary model in the Keynesian tradition that is deemed serviceable for analyzing the short run and there is a nonmonetary neoclassical theory thought capable of handling the long run. But do the Keynesian and neoclassical models meet the challenges thrown out by the main events of the past few decades—the ’80s shock to Europe taking the form of an ext...

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Open economy macroeconomics typically abstracts from portfoli...

Dark matter is believed to account for 83 percent of the matter in the universe and plays a central role in cosmology modeling. This paper argues that an analogous form of dark matter plays a similarly important role in international macroeconomics. Like its cosmological counterpart, exchange-rate dark matter cannot be directly observed, but its existence can be inferred from observations on th...

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...

We explore the welfare implications of several …scal policies in an estimated two-country New Open Economy Macroeconomics (NOEM) model of the European Monetary Union (EMU). The model features incomplete …nancial markets, home bias in …nal consumption baskets and in input utilization. We …rstly de…ne the optimal policy. In addition to the optimal provision of public goods, the optimal policy inv...