International Dimensions of Optimal Monetary Policy

Corsetti, Giancarlo; Pesenti, Paolo

doi:10.3386/w8230

Cited by 106 publications

(145 citation statements)

References 0 publications

Supporting

Mentioning

142

Contrasting

Order By: Relevance

“…We set the elasticity of substitution across brands, , to 8, which corresponds to a 14 percent markup of prices over wages in the steady state. For simplicity we set the elasticity across di¤erent types of goods, , to the same value for most computations, and consider the case of a unit elasticity as an extension, as this is a commonly used value (Corsetti and Pesenti 2005). The elasticity of substitution across the di¤erent types of labor, , is set at 21, which implies a 5 percent markup of wages over the cost of e¤ort in the steady state.…”

Section: General Approachmentioning

confidence: 99%

See 1 more Smart Citation

Financial Integration and the Wealth Effect of Exchange Rate Fluctuations

Tille

2005

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractA growing body of research emphasizes the direct impact of exchange rate movements on the value of U.S. foreign assets. Because a substantial amount of U.S. assets are denominated in foreign currencies, a depreciation of the dollar leads to large capital gains. First, we present a detailed decomposition of the U.S. balance sheet, which exhibits substantial leverage in terms of currencies and across asset categories. The United States holds 50 percent of GDP in foreign-currency assets and is long in FDI (foreign direct investment) and equity positions and short in debt and banking positions. Then, we incorporate these features of international financial integration in a simple general equilibrium model and analyze how they affect the international transmission of monetary shocks. We find that financial integration is a central component of the model, with the valuation gains from an exchange rate depreciation leading to a welfare effect that is at least as large as that stemming from nominal rigidities alone but possibly much larger. We characterize how interdependence is affected by the composition of the portfolio across asset categories and how structural features of the model interact with financial integration.

show abstract

Section: General Approachmentioning

confidence: 99%

“…Several contributions argue for a smaller elasticity, with a unit value being a standard parametrization (see for instance Corsetti and Pesenti 2005). For brevity, we focus on the case of full nominal rigidities ( = = 0) and complete exchange-rate pass-through ( = 1).…”

Section: Limited Substitutability Between Types Of Goodsmentioning

confidence: 99%

Financial Integration and the Wealth Effect of Exchange Rate Fluctuations

Tille

2005

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…In the traditional literature, many have argued that the gains from coordination are likely to be small because a flexible exchange-rate system would effectively insulate impacts of foreign disturbances on domestic employment and output [e.g., Mundell (1961) and the survey by McKibbin (1997)]. In the NOEM literature pioneered by Obstfeld and Rogoff (1995), it has been shown that, although gains from coordination are theoretically possible, they are quantitatively small [e.g., Rogoff (2000a, 2002), Corsetti and Pesenti (2005)]. …”

Section: Introductionmentioning

confidence: 99%

“…Several potential sources have been identified. For instance, the gains from coordination can be related to the degree of exchange-rate pass-through [e.g., , Duarte (2003), and Corsetti and Pesenti (2005)]. 1 Even with perfect exchange-rate pass-through, inward-looking monetary policy can be suboptimal and be improved upon by coordination, depending on the values of the intertemporal elasticity and the elasticity of substitution between goods produced in different countries [e.g., Clarida, et al (2002), Benigno and Benigno (2003), Pappa (2004), Sutherland (2002a, and Tsacharov (2004)].…”

Section: Introductionmentioning

confidence: 99%

Gains from Coordination in a Multi-Sector Open Economy: Does it Pay to be Different?

Liu

Pappa

2005

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…The mean of the inverse labor supply elasticity and the mean of the substitution elasticity between domestic and foreign goods are set to one as is commonly found in the literature (Christiano, Eichenbaum, and Evans, 2005;Corsetti and Pesenti, 2005). Both parameters are assumed to follow a gamma distribution.…”

Section: Prior Distributionsmentioning

confidence: 99%

Driving forces of the Swiss output gap

Leist

2013

Swiss J Economics Statistics

View full text Add to dashboard Cite

Summary What drives the output gap? Contrary to standard agnostic statistical approaches, New Keynesian small open economy models allow decomposing the output gap into its shocks and confirm the conventional wisdom that most of the variation is due to foreign shocks. However, the risk premium shock also plays an important role. It has a procyclical effect on the output gap except for the most recent recession, where the economic agents demanded a higher risk premium probably due to the large Swiss financial sector. This helped to dampen the recession because of the depreciation of the domestic currency due to this shock.

show abstract

International Dimensions of Optimal Monetary Policy

Cited by 106 publications

References 0 publications

Financial Integration and the Wealth Effect of Exchange Rate Fluctuations

Financial Integration and the Wealth Effect of Exchange Rate Fluctuations

Gains from Coordination in a Multi-Sector Open Economy: Does it Pay to be Different?

Driving forces of the Swiss output gap

Contact Info

Product

Resources

About