In this paper, we consider a small open economy under the New Keynesian model with unemployment of Gali (2011a, b) to discuss the design of the monetary policy. Our findings can be summarized in three parts. First, even with the existence of unemployment, the optimal policy is to minimize...

In this paper, we consider a small open economy under the New Keynesian model with unemployment of Galí (2011a, b) to discuss the design of the monetary policy. Our findings can be summarized in three parts. First, even with the existence of unemployment, the optimal policy is to minimize...