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

77 Pages Posted: 6 Oct 2005

See all articles by Giancarlo Corsetti

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)

Paolo A. Pesenti

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

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, 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.

Keywords: Optimal monetary policy, nominal rigidities, exchange rate pass-through, international cooperation

JEL Classification: E31, E52, F42

Suggested Citation

Corsetti, Giancarlo and Pesenti, Paolo A., The Simple Geometry of Transmission and Stabilization in Closed and Open Economies (May 2005). CEPR Discussion Paper No. 5080. Available at SSRN: https://ssrn.com/abstract=776667

Giancarlo Corsetti (Contact Author)

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

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Florence, Florence 50014
Italy

University of Rome III - Department of Economics ( email )

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Rome, 00154
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Centre for Economic Policy Research (CEPR)

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United Kingdom

Paolo A. Pesenti

Federal Reserve Bank of New York ( email )

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

National Bureau of Economic Research (NBER)

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