Globalization and Monetary Policy: An Introduction

95 Pages Posted: 20 May 2009

See all articles by Enrique Martínez-García

Enrique Martínez-García

Federal Reserve Bank of Dallas - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2008

Abstract

Greater openness has become an almost universal feature of modern, developed economies. This paper develops a workhorse international model, and explores the role of standard monetary policy rules applied to an open economy. For this purpose, I build a two-country DSGE model with monopolistic competition, sticky prices, and pricing-to-market. I also derive the steady state and a log-linear approximation of the equilibrium conditions. The paper provides a lengthy explanation of the steps required to derive this benchmark model, and a discussion of: (a) how to account for certain well-known anomalies in the international literature, and (b) how to start 'thinking' about monetary policy in this environment.

Keywords: Globalization, Two-Country DSGE, Monetary Policy

JEL Classification: F3, F4

Suggested Citation

Martinez-Garcia, Enrique, Globalization and Monetary Policy: An Introduction (April 1, 2008). Available at SSRN: https://ssrn.com/abstract=1257262 or http://dx.doi.org/10.2139/ssrn.1257262

Enrique Martinez-Garcia (Contact Author)

Federal Reserve Bank of Dallas - Research Department ( email )

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