Monetary and Exchange Rate Policies in an Open Macroeconomic Model with Unemployment and Rational Expectations.

A two-period, two-good op en economy macroeconomic model is contructed. There is excess supply of labor in each period, and agents have rational expectations about future economic variab les. Money is also introduced explicitly into the analysis; agents determine the ir money holdings, consumption, and savings through a process of intertemporal o ptimization. A number of different exchange-rate regimes are possible, and in ea ch of these the effectsof monetary and exchange-rate policies are analyzed. Copyright 1986 by Royal Economic Society.