Globalization and Monetary Policy: An Introduction

Posted: 14 Jul 2021

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: 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.

Suggested Citation

Martinez-Garcia, Enrique, Globalization and Monetary Policy: An Introduction (2008). Globalization and Monetary Policy Institute Working Paper No. 11, Available at SSRN: https://ssrn.com/abstract=3885376

Enrique Martinez-Garcia (Contact Author)

Federal Reserve Bank of Dallas - Research Department ( email )

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