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Teaching New Keynesian Open Economy Macroeconomics at the Intermediate Level

  • Peter Bofinger
  • Eric Mayer
  • Timo Wollmersh�user

For the open economy, the workhorse model in intermediate textbooks still is the Mundell-Fleming model, which basically extends the investment and savings, liquidity preference and money supply (IS-LM) model to open economy problems. The authors present a simple New Keynesian model of the open economy that introduces open economy considerations into the closed economy consensus version and that still allows for a simple and comprehensible analytical and graphical treatment. Above all, their model provides an efficient tool kit for the discussion of the costs and benefits of fixed and flexible exchange rates, which also was at the core of the Mundell-Fleming model.

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File URL: http://hdl.handle.net/10.3200/JECE.40.1.080-102
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Article provided by Taylor & Francis Journals in its journal The Journal of Economic Education.

Volume (Year): 40 (2009)
Issue (Month): 1 (January)
Pages: 80-102

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Handle: RePEc:taf:jeduce:v:40:y:2009:i:1:p:80-102
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  2. Carl E. Walsh, 2002. "Teaching Inflation Targeting: An Analysis for Intermediate Macro," The Journal of Economic Education, Taylor & Francis Journals, vol. 33(4), pages 333-346, December.
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  12. Peter Bofinger & Eric Mayer & Timo Wollmersh�user, 2006. "The BMW Model: A New Framework for Teaching Monetary Economics," The Journal of Economic Education, Taylor & Francis Journals, vol. 37(1), pages 98-117, January.
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  15. Tamim Bayoumi and Barry Eichengreen., 1992. "Shocking Aspects of European Monetary Unification," Economics Working Papers 92-187, University of California at Berkeley.
  16. Taylor, John B., 1998. "The Robustness and Efficiency of Monetary Policy Rules as Guidelines for Interest Rate Setting by the European Central Bank," Seminar Papers 649, Stockholm University, Institute for International Economic Studies.
  17. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
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