This paper investigates business cycles in Asia. Business cycles in developing small, open countries are different from those in developed small countries. Most interesting characteristics in developing countries are excessive consumption volatilities and strong countercyclical net export. Asia...

Introducing habit formation into an open economy macroeconomic model with price stickiness, we examine the characteristics of an optimal monetary policy. We find that, first, the optimal policy rule entails interest rate smoothing and responds to the lagged values of the foreign interest rate...