The concept of the natural or equilibrium rate of interest has attracted a lot of attention from monetary policymakers in recent years. Most attempts to estimate the natural rate use a closed economy framework. We argue that in the face of greater integration of global product and capital...

This paper reviews the evidence on the relationship between openness and inflation. There is a robust negative relationship across countries, first documented by Romer (1993), between a country's openness to trade and its long-run inflation rate. However, a key part of the standard explanation...

We investigate the Bayesian approach to model comparison within a two-country framework with nominal rigidities using the workhorse New Keynesian open-economy model of Martínez-García and Wynne (2010). We discuss the trade-offs that monetary policy — characterized by a Taylor-type rule —...

This technical note is developed as a companion to the paper ‘Assessing Bayesian Model Comparison in Small Samples' (Globalization and Monetary Policy Institute working paper no. 189). Taking the workhorse open-economy model of Martínez-García and Wynne (2010) with nominal rigidities under...

We investigate the Bayesian approach to model comparison within a two-country framework with nominal rigidities using the workhorse New Keynesian open-economy model of Martínez-García and Wynne (2010) . We discuss the trade-offs that monetary policy – characterized by a Taylor-type rule –...