The Simple Geometry of Transmission and Stabilization in Closed and Open Economies

75 Pages Posted: 28 Jun 2012

See all articles by Giancarlo Corsetti

Giancarlo Corsetti

University of Cambridge

Paolo A. Pesenti

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Date Written: May 2005

Abstract

This paper provides an introduction to the recent literature on macroeconomic stabilization in closed and open economies. We present a stylized theoretical framework, and illustrate its main properties with the help of an intuitive graphical apparatus. Among the issues we discuss: optimal monetary policy and the welfare gains from macroeconomic stabilization; international transmission of real and monetary shocks and the role of exchange rate pass-through; the design of optimal exchange rate regimes and monetary coordination among interdependent economies.

Suggested Citation

Corsetti, Giancarlo and Pesenti, Paolo A., The Simple Geometry of Transmission and Stabilization in Closed and Open Economies (May 2005). NBER Working Paper No. w11341. Available at SSRN: https://ssrn.com/abstract=2094884

Giancarlo Corsetti (Contact Author)

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Paolo A. Pesenti

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5493 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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