Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153318
Authors: 
Adjemian, Stéphane
Darracq Pariès, Matthieu
Smets, Frank
Year of Publication: 
2008
Series/Report no.: 
ECB Working Paper 884
Abstract: 
The objective of this paper is to examine the main features of optimal monetary policy cooperation within a micro-founded macroeconometric framework. First, using Bayesian techniques, we estimate a two-country dynamic stochastic general equilibrium (DSGE) model for the United States (US) and the euro area (EA). The main features of the new open economy macroeconomics (NOEM) are embodied in our framework: in particular, imperfect exchange rate pass-through and incomplete financial markets internationally. Each country model incorporates the wide range of nominal and real frictions found in the closed-economy literature: staggered price and wage settings, variable capital utilization and fixed costs in production. Then, using the estimated parameters and disturbances, we study the properties of the optimal monetary policy cooperation through welfare analysis, impulse responses and variance decompositions.
Subjects: 
Bayesian estimation
DSGE Models
new open economy macroeconomics
optimal monetary policy
JEL: 
E4
E5
F4
Document Type: 
Working Paper

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