We develop a model of a small open economy with three types of nominal rigidities (domestic goods prices, imported goods prices and wages) and eight different structural shocks. We estimate the model's structural parameters using a maximum likelihood procedure and use it to compute...

This paper shows how to use optimal control theory to derive time-consistent optimal government policies in nonlinear dynamic general equilibrium models. It extends the insight of Cohen and Michel (1988), who showed that in _linear_ models time-consistent policies can be found by imposing a...

This paper analyzes the effects of the implementation of a monetary union on the international transmission of monetary and fiscal policies. A dynamic three-country general equilibrium model, exhibiting monopolistic competition and sticky prices, is used to show how asymmetric monetary and...