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The simple geometry of transmission and stabilization in closed and open economies

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  • Giancarlo Corsetti
  • Paolo Pesenti

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.

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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 209.

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Date of creation: 2005
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Handle: RePEc:fip:fednsr:209

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Keywords: Macroeconomics ; Monetary policy ; Foreign exchange rates;

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