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

75 Pages Posted: 30 May 2005

See all articles by Paolo A. Pesenti

Paolo A. Pesenti

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

Giancarlo Corsetti

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); University of Rome III - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

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, illustrating its main properties with the help of an intuitive graphical apparatus. Among the issues we discuss are optimal monetary policy and the welfare gains from macroeconomic stabilization, the international transmission of real and monetary shocks and the role of exchange rate pass-through, and the design of optimal exchange rate regimes and monetary coordination among interdependent economies.

Keywords: optimal monetary policy, nominal rigidities, exchange rate pass-through

JEL Classification: E31, E52, F42

Suggested Citation

Pesenti, Paolo A. and Corsetti, Giancarlo, The Simple Geometry of Transmission and Stabilization in Closed and Open Economies (May 2005). FRB of New York Research Paper No. 209. Available at SSRN: https://ssrn.com/abstract=730103 or http://dx.doi.org/10.2139/ssrn.730103

Paolo A. Pesenti (Contact Author)

Federal Reserve Bank of New York ( email )

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National Bureau of Economic Research (NBER)

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Giancarlo Corsetti

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

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University of Rome III - Department of Economics ( email )

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+39 06 5737 4093 (Fax)

Centre for Economic Policy Research (CEPR)

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United Kingdom

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