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Optimal Monetary Policy in Small Open Economies: Producer Currency Pricing

Author

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  • Mikhail Dmitriev

    (Department of Economics, Florida State University)

  • Jonathan Hoddenbagh

    (Department of Economics, Johns Hopkins University)

Abstract

We establish the share of exports in production as a sufficient statistic for optimal noncooperative monetary policy. Under financial autarky, markups positively co-move with the export share. For complete markets, markups should be procyclical if the export share is procyclical. When central banks cooperate, markups are constant under complete markets, and countercyclical under financial autarky.

Suggested Citation

  • Mikhail Dmitriev & Jonathan Hoddenbagh, 2019. "Optimal Monetary Policy in Small Open Economies: Producer Currency Pricing," Working Papers wp2019_10_01, Department of Economics, Florida State University.
    • Handle: RePEc:fsu:wpaper:wp2019_10_01
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    More about this item

    Keywords

    open economy macroeconomics; optimal monetary policy; price stability;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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