We analyze the transmission of monetary shocks in a new openeconomy macroeconomics model with one-period nominal contracts and imperfect information. Shocks may have transitory and persistent components, which only through accumulation of information over time becomes known. Responses to shocks...

Empirical evidence documents substantial persistence in the adjustment process to nominal shocks. Existing open-economy models have failed either to generate interesting dynamics or found that the mechanisms are quantitatively weak. We consider the propagation of nominal shocks in a fully...