How should monetary policy respond to excessive capital inflows that appreciate the currency and widen the external deficit? Using the workhorse two-country open-macro model, we derive a quadratic approximation of the utility-based global loss function in incomplete market economies, and solve...

The paper develops a simple choice-theoretic model suitable for carrying out welfare" analyses of the international transmission of monetary and fiscal policies. The model can be" solved in closed form and illustrated in terms of the simplest graphical apparatus provide the analysis of...

The paper develops a simple choice-theoretic model suitable for carrying out welfare" analyses of the international transmission of monetary and fiscal policies. The model can be" solved in closed form and illustrated in terms of the simplest graphical apparatus provide the analysis of...

This paper analyzes the welfare implications of international spillovers related to productivity gains, changes in market size, or government spending. We introduce trade costs and endogenous varieties in a two-country general-equilibrium model with monopolistic competition, drawing a...