This paper studies the applicability of the Marshall-Lerner condition to the "basic" Obstfeld and Rogoff (1995) model. It shows that the Marshall-Lerner condition does apply to this class of models with homothetic preferences when product differentiation across countries is imposed. This paper...

In this article, we analyse the conduct of optimal monetary policy for the new euro area. The aggregate euro area economy is modelled to have relatively sluggish adjustment properties and a private sector with mainly backward-looking expectations. In this economy, we assume that the central bank...

In this paper, we examine the performance and robustness of optimized interest-rate rules in four models of the euro area that differ considerably in terms of size, degree of aggregation, relevance of forward-looking behavioral elements, and adherence to microfoundations. Our findings are...