What are the macroeconomic consequences of the dominant role of the dollar in the international monetary system? Here, we present a calibrated two country model in which exports are invoiced in the key currency, and government bonds denominated in the key currency are held internationally to...

What are the macroeconomic consequences of the dominant role of the dollar in the international monetary system? Here, we present a calibrated two country model in which exports are invoiced in the key currency, and government bonds denominated in the key currency are held internationally to...

This paper incorporates banks as well as frictions in the market for bank capital into a standard New Keynesian model and considers the positive and normative implications of various financial shocks. It shows that the frictions matter significantly for the effects of the shocks and the...