The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Macroeconomics In Open Economies
Optimal Monetary Policy in Open Economies Complete Markets and Producer Currency Pricing Simon P. Lloyd
[email protected] University of Cambridge
August 2014
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Main Results: Corsetti et al. (2010) Complete Markets, Cooperation and Producer Currency Pricing I I
Full insurance across all possible contingencies across borders. Full exchange rate pass through → Endogenous movements in exchange rate correct relative price misalignments, preventing price dispersion for the same
I
good across borders. Optimal Policy: ‘Divine Coincidence’ F F
Efficient Shocks: Completely stabilise domestic GDP deflator and output gap. Inefficient Shocks: Flexible Inflation Target → Trade off fluctuations in the GDP deflator and the output gap.
Breaking the ’Divine Coincidence’ I
Complete Markets, Cooperation and Local Currency Pricing
I
Complete Markets and Strategic Interaction
I
Incomplete Markets
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Outline: Complete Markets and PCP
1
Reprise of the Model (Corsetti et al., 2010)
2
A Familiarisation with the MATLAB/Dynare Code
3
Complete Markets, Cooperation and Producer Currency Pricing
4
I
Productivity and Preference Shocks
I
Markup Shocks
Breaking the ‘Divine Coincidence’ - Strategic Interaction
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Three Key Points b = 0. Complete Markets ⇒ Perfect Risk Sharing ⇒ D PCP ⇒ Full exchange rate pass through Exchange Rate Depreciation ↑ εt ⇒ ToT Worsening ↑ Tt =
εt PF∗,t PH,t
Exchange rate movements a substitute for product price flexibility in fostering international relative price adjustment vis-`a-vis macroeconomic shocks. New Keynesian Phillips Curve πH,t − βEt πH,t+1
=
(1 − αβ)(1 − α) h bH,t − Y˜ fb + µ (η + σ) Y bt H,t α(1 + θη) i −(1 − aH )2aH (σφ − 1) Tbt − T˜tfb
The international transmission of shocks depends critically on whether σφ > 1 (home and foreign goods substitutes) or σφ < 1 (complements). Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Households
Two countries: {H, F }. Complete specialisation in production of tradable. For policy analysis: I
Countries are symmetric: n = 1 − n and aH = aF∗ ≡ 1 − aH∗ .
I
Cashless economies M = 0.
Utility function for a consumer j in country H: (∞ " #) Z n j 1−σ 1+η X − 1 C 1 y (h) t −η t V j = E0 ζC ,t − ζ dh 1−σ n 0 Y ,t 1 + η t=0
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
(1)
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Consumption basket: Ct =
φ−1
1/φ aH CH φ
+
φ−1 φ
1/φ aF CF
φ φ−1
where: θ # θ−1 " Z 1/θ n θ−1 1 Ct (h, j) θ dh CH,t (j) ≡ n 0 θ # θ−1 " Z 1/θ n θ−1 1 CF ,t (j) ≡ Ct (f , j) θ df n 0
with θ > φ. φ: ‘Trade elasticity’ - Elasticity of substitution between CH and CF . θ: ‘Brand elasticity’ - Elasticity of substitution between brands of the same good. Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Intra-temporal Household Optimisation Utility-based CPI for country H: 1 h i 1−φ 1−φ Pt = aH PH,t + (1 − aH )PF1−φ ,t
(2)
where PH,t and PF ,t are sub-indexes, respectively defined as: PH,t
1 Z n 1−θ 1 1−θ ≡ Pt (h) dh n 0
, PF ,t
1 ≡ 1−n
Z
1 1−θ
n 1−θ
Pt (f )
df
0
Demand by individual j in country H: I
For brand h of good H: Ct (h, j) = aH
I
Pt (h) PH,t
−θ
PH,t Pt
−φ
Ctj
(3)
For brand f of good F : Ct (f , j) = (1 − aH )
Simon P. Lloyd
Pt (f ) PF ,t
−θ
Optimal Monetary Policy: CM & PCP
PF ,t Pt
−φ
Ctj August 2014
(4)
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Inter-temporal Household Optimisation Individual flow budget constraint for representative home agent under complete markets: Z BH,t+1 + qH,t (st+1 )BH,t (st+1 )dst+1 ≤ (1 + it )BH,t + BH,t R Pt (h)yt (h)dh +(1 − τt ) − PH,t Tt − PH,t CH,t − CF ,t PF ,t n Inter-temporal Euler Equation: " # −σ Ct+1 Ct−σ ζC ,t = (1 + it )Et βζC ,t+1 Pt Pt+1
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
(5)
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Goods Market Clearing Production Function: η
yt (h) = ζY1+η ,t lt (h)
(6)
Total Real Cost: −
η
tct = wt ζY ,t1+η yt (h) where wt is the real wage. The real marginal cost is given by: −
η
mct = wt ζY ,t1+η
(7)
Goods Market Equilibrium: yt (h) = ytd (h) ≡
Simon P. Lloyd
Pt (h) PH,t
−θ
PH,t Pt
−φ
Optimal Monetary Policy: CM & PCP
[aH Ct + (1 − aH )Ct∗ ]
August 2014
(8)
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Price Setting: PCP PCP: Price rigid in currency of producers ⇒ Firms set Pt (h) for domestic markets and set export prices in domestic currency εt Pt∗ (h). α = α∗ ∈ [0, 1) cannot change nominal price; 1 − α reset price optimally. The home firm’s problem can be written: ∞ X UC ,t+s s (1 − τt+s ) max∗ Et (αβ) Pt+s {pt (h),εt pt (h)} s=0 " −θ −φ pt (h) PH,t+s × pt (h) (aH Ct+s ) PH,t+s Pt+s !−θ −φ ∗ ∗ P ε p (h) t H,t+s t ∗ +εt pt∗ (h) (1 − aH )Ct+s ∗ ∗ εt+s PH,t+s Pt+s −V (yt+s|t (h), ζY ,t+s ) subject to its demand function. Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Taking first-order conditions with respect to pt (h) and εt pt∗ (h) yields: ∞ X θ UC ,t+s s Pt (h) − Vy (yt+s|t (h), ζY ,t+s ) Et (αβ) Pt+s (1 − τt+s )(θ − 1) s=0 " #) −θ −φ Pt (h) PH,t+s × (aH Ct+s ) = 0 (9) PH,t+s Pt+s
Et
∞ X
s
(αβ)
s=0
Simon P. Lloyd
θ UC ,t+s ∗ εt Pt (h) − Vy (yt+s|t (h), ζY ,t+s ) Pt+s (1 − τt+s )(θ − 1) !−θ −φ ∗ ∗ P ε P (h) t t H,t+s ∗ = 0 (10) × (1 − a )C H t+s ∗ ∗ εt+s PH,t+s Pt+s
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Since all producers that reset their price in period t will choose the same price level, there are two equations that describe the dynamic evolution of PH,t and PF ,t : PH,t 1−θ = αPH,t−1 1−θ + (1 − α)Pt (h)
1−θ
(11)
1−θ
PF∗,t 1−θ = α∗ PF∗,t−1 1−θ + (1 − α∗ )Pt∗ (f ) where α∗ = α.
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
(12)
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Exchange Rate Determination Intimately linked with the structure of international asset markets. Complete Markets: Price equalisation in market for state contingent claims BH,t implies perfect international risk sharing: Ct∗ −σ ζC∗ ,t Ct−σ ζC ,t = Pt εt Pt∗ Using the definition of the real exchange rate Qt = Qt =
Ct∗ −σ ζC∗ ,t Ct−σ ζC ,t
≡
εt Pt∗ Pt ,
this becomes:
UC (Ct∗ , ζC∗ ,t ) UC (Ct , ζC ,t )
(13)
⇒ Home per capita consumption can only rise relative to foreign per capita income if the real exchange rate depreciates.
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Dynare File dyn 01 pcp cm coop.mod
See Guide to MATLAB Files for a complete description. Code includes productivity (zt), preference (psi) and markup (tow) shocks. Key to differing international transmission of markup shocks is the elasticity of substitution between home and foreign goods (φ = phi = elas sub), on line 107. We consider three values of elas sub: 0.3, 0.5 and 0.7 (low, mid, high). Important to change activated commands on lines 560-576 when changing the parameterisation of elas sub. dyn 01 pcp cm coop news.mod - Code for ‘anticipated’ productivity shocks.
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
MATLAB File figs 01 transmission pcp.m
Code to produce the international transmission of exogenous shocks: I
Section 1: Home Productivity (Positive)
I
Section 2: Home Preferences (Positive)
I
Section 3: Home Markups (Negative)
Must run dyn 01 pcp cm coop.mod for elas sub equal to 0.3, 0.5 and 0.7 respectively, saving each impulse response under a different name (e.g. ... low; ... mid; and ... high). Must ensure that load(·) commands include valid file directories. figs 01 transmission news.m - Code for ‘anticipated’ productivity shock IRFs.
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Efficiency
Efficiency requires perfect risk sharing and full exchange rate pass through (ERPT) Complete Markets ⇒ Perfect Risk Sharing I
Dt : Welfare relevant measure of cross-country demand imbalance σ ∗ Ct 1 ζC ,t Dt = Ct∗ Qt ζC ,t
I
bt = 0. The marginal utility of Under complete markets, Dt = 1 ⇒ D consumption is equalised across borders.
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
PCP ⇒ Full ERPT I I
b H,t = ∆ b F ,t = 0. No deviations from the law of one price (LOOP): ∆ A monetary expansion that causes a nominal exchange rate depreciation (↑ εt ) will... F
Reduce the price of home exports to the foreign economy in terms of foreign currency: 1 εt P t (h) ↑εt+s Increase the price of foreign imports in the domestic economy in terms of ∗ ↓Pt+s (h) =
F
domestic currency:
∗
↑Pt+s (f ) = ↑εt+s F
In turn, this will worsen the terms of trade: ↑Tt =
I
P t (f ) εt
↑εt PF∗,t ↓PH,t
Nominal exchange rate movements have expenditure switching effects: a home depreciation switches home and foreign demand in favour of home goods.
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
New Keynesian Phillips Curves Inflation dynamics under PCP and CM are summarised by two NKPCs: πH,t − βEt πH,t+1
=
πF∗ ,t − βEt πF∗ ,t+1
=
(1 − αβ)(1 − α) h bH,t − Y˜ fb + µ (η + σ) Y bt H,t α(1 + θη) i −(1 − aH )2aH (σφ − 1) Tbt − T˜tfb (1 − αβ)(1 − α) h bF ,t − Y˜ fb + µ (η + σ) Y b∗t F ,t α(1 + θη) i +(1 − aH )2aH (σφ − 1) Tbt − T˜tfb
A policy that improves the home terms of trade (↓ Tt ) [e.g. an increase in foreign output] can increase or decrease home marginal costs and inflation. ⇒ The international transmission of shocks depends critically on whether σφ > 1 (home and foreign goods substitutes) or σφ < 1 (complements).
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Two opposing channels: I
Wages a function of import prices: Improved terms of trade
⇒
↓ Price of imports
⇒
↓ Home wages (marginal costs)
⇒
↓ Home prices and inflation ⇒ Symmetry
Dominant when H and F are complements (σφ < 1). I
Portfolio channel in complete markets: ↑ Foreign output
⇒
↑ Income on home portfolios
⇒
↑ Home consumption for given relative prices
⇒
↑ Home wages (marginal costs)
⇒
↑ Home prices and inflation ⇒ Opposite
Dominant when H and F are substitutes (σφ > 1).
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
The Optimal Policy Problem Cooperation, commitment, timeless perspective and monopolistic distortions offset by appropriate subsidies: 2 1 PCP−CM fb bH,t Lt n − (σ + η) Y˜H,t −Y 2 2 bF ,t +(σ + η) Y˜Ffb,t − Y θα(1 + θη) θα(1 + θη) π2 + π2 (1 − αβ)(1 − α) H,t (1 − αβ)(1 − α) F ,t 2 fb b ˜ +2aH (1 − aH )(σφ − 1)Φ Tt − Tt
+
This loss is minimised subject to NKPCs, choosing πH,t , πF∗ ,t , YˆH,t , YˆF ,t .
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Key: Under CM, the output gap and Tt misalignment are linearly related, implying no trade-off between stabilising international relative prices and output gaps across countries. i h bF ,t − Y˜ fb bH,t − Y˜ fb − Y T˜tfb − Tbt = Φ−1 Y H,t F ,t Cross-country sum and difference targeting rules simplify to two independent country-specific rules in terms of the output gap and domestic inflation only: h i bH,t − Y˜ fb − Y bH,t−1 − Y˜ fb 0 = + θπH,t Y H,t H,t−1 h i bF ,t − Y˜ fb − Y bF ,t−1 − Y˜ fb 0 = + θπF∗ ,t Y F ,t F ,t−1
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
The Optimal Policy Prescription Optimal monetary policy under cooperation, complete markets and producer currency pricing is identical to that in the baseline closed economy one-sector model with flexible wages (Woodford, 2003, Chapter 6). Foreign shocks are relevant to domestic policy only to the extent that they influence the domestic output gap and inflation. Crucial distinction between efficient and inefficient shocks: I
Efficient Shocks: Set GDP deflator inflation to zero to keep output gap closed at all times. Nominal and real exchange rates will fluctuate with these shocks and adjust international relative prices without creating any policy trade-offs.
I
Inefficient Shocks: Partially accommodate such shocks in the short run. The response of output gaps and inflation will be shaped by the nature of cross-border spillovers.
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Efficient Shock: Productivity Figure : PCP - CM - Cooperation - Home Productivity Increase under Optimal Policy
φ = 0.3, 0.5, 0.7 in the first, second and third columns respectively. σ = 2 in all columns. Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Inefficient Shock: Markups Figure : PCP - CM - Cooperation - Home Markup Decrease under Optimal Policy
φ = 0.3, 0.5, 0.7 in the first, second and third columns respectively. σ = 2 in all columns. Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Substitutes σφ > 1: Home terms of trade depreciation raises marginal costs for foreign producers. I
Foreign monetary policy contracts to counteract the rise in foreign inflation.
I
Negative co-movement between home and foreign output gap, inflation and monetary stance.
Complements σφ < 1: Home terms of trade depreciation causes foreign marginal costs to fall with better import prices. I
Favourable ‘cost-push’ shock for foreign producers.
I
Foreign monetary policy partially accommodates this by expanding.
I
Positive co-movement between home and foreign output gap, inflation and monetary stance.
σφ = 1: Two channels cancel ⇒ no international transmission under optimal policy.
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Anticipated Home Productivity Shock Figure : PCP-CM-Coop - Anticipated Positive Home Prod. Shock under Opt. Pol.
φ = 0.3, 0.5, 0.7 in the first, second and third columns respectively. σ = 2 in all columns. Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Breaking the ‘Divine Coincidence’
Complete Markets, Cooperation and Local Currency Pricing Complete Markets and Strategic Interaction Incomplete Markets
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Strategic Interaction
The ‘Traditional’ Story: ‘Competitive Devaluation’ I
Aim to manipulate terms of trade in order to steal markets from foreign competitors, to the benefit of domestic employment and output.
The NOEM View: More general ‘Strategic Manipulation of the Terms of Trade’ I I
Do not exclusively make domestic products cheaper. Terms of trade may move in either direction: F
Competitive Depreciation for Complements (σφ < 1).
F
Competitive Appreciation for Substitutes (σφ > 1).
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
A Negative Home Productivity Shock Contraction in the supply of home goods will appreciate the terms of trade (↓ Tt ). I
Substitutes (σφ > 1): F
Fall in domestic production will reduce dis-utility of labour for domestic workers.
F
With improved terms of trade, domestic households can acquire more units of foreign goods, which are substitutes for the domestic one.
F
Incentive to strategically appreciate the currency to reap the benefits of foreign production.
I
Complements (σφ < 1): F
Utility will fall with a marginal decrease in domestic production, even when terms of trade worsens
F
Incentive to strategically depreciate the currency to make home goods relatively cheaper abroad.
In Nash equilibrium, both countries attempt to manipulate their terms of trade. It may be self-defeating if such an attempt is matched by the policy response of the other country. Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Dynare File dyn 02 pcp cm nash.mod and dyn 02 pcp cm coop.mod
Two country, Open-Loop Nash Equilibrium under CM and PCP, with the GDP deflator as policy instrument. Code includes productivity (zt), preference (psi) and markup (tow) shocks. Key to differing incentives to strategically manipulate the terms of trade is the elasticity of substitution between home and foreign goods (φ = phi = elas sub), on line 104. We consider two values of elas sub: 0.3 and 0.7 (low, high). Important to change activated commands on lines 473-481 when changing the parameterisation of elas sub.
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
MATLAB File figs 02 transmission nash.m
Code to produce the Nash gaps (difference between Nash and cooperative solutions) for the international transmission of exogenous shocks under optimal policy: I
Section 1: Home Productivity (Positive)
I
Section 2: Home Markups (Negative)
Must run dyn 02 pcp cm nash.mod for elas sub equal to 0.3 and 0.7 respectively, saving each impulse response under a different name (e.g. ... low and ... high). Must ensure that load(·) commands include valid file directories.
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Nash Gaps: Home Productivity Increase Figure : PCP - CM - Nash Gaps - Home Productivity Increase under Optimal Policy
φ = 0.3, 0.7 in the first and second columns respectively. σ = 2 in both columns. aH > 1/2. Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Complements (σφ < 1): ‘Strategic Devaluation’: I
Home output opportunistically under-stabilised, overshooting the flexible-price level.
I
Achieved by depreciating the terms of trade relative to its flexible-price level in order to ‘steal’ the market from foreign producers.
Substitutes (σφ > 1): ‘Strategic Appreciation’: I
Home output over-stabilised.
I
By keeping output short of flexible-price level, home households can save on their labour efforts.
I
Domestic households can increase their consumption utility by acquiring foreign goods.
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Welfare Gains from Cooperation? Because of price dispersion and relative price misalignment, the Nash allocation is welfare dominated by price stability. BUT the observed difference between the Nash and cooperative allocations is small ⇒ in welfare terms, the gains from cooperation are close to zero. There exist special cases where there are no gains from cooperation: I
Corsetti and Pesenti (2005): Symmetric Cobb-Douglas Consumption Aggregator; Logarithmic Preferences; G = 0; Only Productivity Shocks.
I
When σφ = 1, there are no cross-border spillovers via the terms of trade on marginal costs with complete markets.
Obstfeld and Rogoff (2002): Under CM, cooperation does not generate appreciable welfare gains relative to optimal stabilisation pursued by independent policymakers. No overriding consensus in the debate over the gains from international policy coordination. Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
The Model
The Code
Optimal Policy
Breaking the ‘Divine Coincidence’
Conclusion Complete Markets, Cooperation and Producer Currency Pricing I I
Full insurance across all possible contingencies across borders. Full exchange rate pass through → Endogenous movements in exchange rate correct relative price misalignments, preventing price dispersion for the same
I
good across borders. Optimal Policy: ‘Divine Coincidence’ F F
Efficient Shocks: Completely stabilise domestic GDP deflator and output gap. Inefficient Shocks: Flexible Inflation Target → Trade off fluctuations in the GDP deflator and the output gap.
Breaking the ’Divine Coincidence’ I
Complete Markets, Cooperation and Local Currency Pricing
I
Complete Markets and Strategic Interaction
I
Incomplete Markets
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
References
Corsetti, G., L. Dedola, and S. Leduc (2010): “Optimal Monetary Policy in Open Economies,” in Handbook of Monetary Economics, ed. by B. M. Friedman and M. Woodford, Elsevier, vol. 3 of Handbook of Monetary Economics, chap. 16, 861–933. Corsetti, G. and P. Pesenti (2005): “International dimensions of optimal monetary policy,” Journal of Monetary Economics, 52, 281–305. Obstfeld, M. and K. Rogoff (2002): “Global Implications Of Self-Oriented National Monetary Rules,” The Quarterly Journal of Economics, 117, 503–535. Woodford, M. (2003): Interest and Prices, Princeton University Press.
Simon P. Lloyd
Optimal Monetary Policy: CM & PCP
August 2014
