This paper provides first and second-order approximation methods for the solution of non-linear dynamic stochastic models in which the exogenous state variables follow conditionally-linear stochastic processes displaying time-varying risk. The first-order approximation is consistent with a...

A positive and normative evaluation of alternative monetary policy regimes is addressed in a two-country general equilibrium model. The behaviour of the exchange rate, as well as of the other macroeconomic variables, depends crucially on the monetary regime chosen, though not necessarily on...

This Paper presents a two-country dynamic general equilibrium model with imperfect competition and nominal price rigidities in which terms of trade shocks coexist with inefficient supply shocks. We analyse the features of the optimal cooperative solution. While terms of trade shocks should be...

A two-country dynamic general-equilibrium model with imperfect competition and price stickiness is considered. This work shows the conditions under which price stability can implement the flexible-price allocation as a Nash equilibrium. This is possible if and only if both countries maintain a...

This paper builds a framework for the analysis of macroeconomic fluctuations that incorporates the endogenous determination of the number of producers and products over the business cycle. Economic expansions induce higher entry rates by prospective entrants subject to irreversible investment...

We show that deviations from long-run stability of product prices are optimal in the presence of endogenous producer entry and product variety in a sticky-price model with monopolistic competition in which price stability would be optimal in the absence of entry. Specifically, a long-run...

The wave of crises that began in 2008 reheated the debate on market deregulation as a tool to improve economic performance. This paper addresses the consequences of increased flexibility in goods and labor markets for the conduct of monetary policy in a monetary union. We model a two-country...

This paper studies the domestic and international effects of national bank market integration in a two-country, dynamic, stochastic, general equilibrium model with endogenous producer entry. Integration of banking across localities reduces the degree of local monopoly power of financial...

This paper reviews the problems that must be resolved at the Intergovernmental Conference in 1996 to clear the way for European Monetary Union: locking in Germany's commitment to the project, and reconciling EMU with variable geometry. It reviews what we know about the costs and benefits of EMU...

The paper analyses monetary and fiscal policy interactions in a three-country world, interpreted to represent two EU economies and the rest of the world. The analysis extends well-known results in the literature on international policy spillovers by investigating the effects of different sizes...