Using data for the Philippines, I develop and estimate a heterogeneous agent model to analyze the role of monetary policy in a small open economy subject to sizable remittance fluctuations. I include rule-of-thumb households with no access to financial markets and test whether remittances are...

Starting from a variant of the New Keynesian model for a small open economy, I extend the standard credit channel framework to show that the presence of imperfect competition in the banking system propagates external shocks and amplifies the business cycle. This novel modeling of the banking...