Optimal monetary policy for open economies

Optimizing models of the business cycle offer a rigorous instrument for analyzing the relation among macroeconomic variables. At the same time, they deliver a natural welfare criterion in terms of the utility of the consumers. The main objective of this dissertation is to study the optimal conduction of monetary policy for open economies.;The first chapter analyzes the strategic interaction between the monetary policymakers of two countries in a model presented by Corsetti and Pesenti (1997). This chapter offers an excursus on non-cooperative towards cooperative solutions. In a non-cooperative equilibrium the monopolistic allocation prevails in both countries while, in a cooperative solution, the competitive allocation is reached. However, cooperation can be counterproductive. Delegation can improve the welfare.;The second and third chapters present a stochastic dynamic general equilibrium model for the analysis of monetary policy in open economies. All the structural equations of this model can be viewed as the modern counterpart to the conventional Mundell-Fleming framework. The welfare criterion has the usual trade-off between stabilizing inflation rate and the output gap and penalizes for deviations of the terms of trade from their natural rates.;Chapter 2 focuses on a currency-area regime. There is an intrinsic inefficiency in a currency area, because monetary policy cannot simultaneously adjust relative prices and stabilize inflation. The common central bank can approximate the feasible first best by pursuing an inflation-targeting policy in which higher weight is given to the inflation rate in the region with higher degree of nominal rigidity.;Chapter 3 exploits the positive consequence of the model of chapter 2. But, the exchange rate is free to fluctuate. The exchange rate is non stationary, unless there is a target to the level. When the costs implied by the nominal interest rate volatility are considered, a managed exchange rate is desirable according to the measure of welfare.