NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Simple Geometry of Transmission and Stabilization in Closed and Open Economies

Giancarlo Corsetti, Paolo Pesenti

NBER Working Paper No. 11341*
Issued in May 2005
NBER Program(s):   IFM

This paper provides an introduction to the recent literature on macroeconomic stabilization in closed and open economies. We present a stylized theoretical framework, and illustrate its main properties with the help of an intuitive graphical apparatus. Among the issues we discuss: optimal monetary policy and the welfare gains from macroeconomic stabilization; international transmission of real and monetary shocks and the role of exchange rate pass-through; the design of optimal exchange rate regimes and monetary coordination among interdependent economies.

*Published: This paper was subsequently published as Comment, Richard Clarida , in NBER book NBER International Seminar on Macroeconomics 2007 (2007)

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