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Globalization and monetary policy: an introduction

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  • Enrique Martinez-Garcia

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

  • Enrique Martinez-Garcia, 2008. "Globalization and monetary policy: an introduction," Globalization and Monetary Policy Institute Working Paper 11, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddgw:11
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    File URL: http://dallasfed.org/assets/documents/institute/wpapers/2008/0011.pdf
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    Cited by:

    1. Wynne, Mark A., 2008. "First steps: developing a research agenda on globalization and monetary policy," Annual Report, Globalization and Monetary Policy Institute, Federal Reserve Bank of Dallas, Globalization and Monetary Policy Institute, pages 4-13.
    2. Pınar Kaynak, 2013. "Inflation Targeting: A Comparative Empirical Analysis," EY International Congress on Economics I (EYC2013), October 24-25, 2013, Ankara, Turkey 220, Ekonomik Yaklasim Association.

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    Keywords

    Monetary policy ; Equilibrium (Economics) ; Globalization ; Macroeconomics ; International finance ; Mathematical models;

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