Financial Frictions and Optimal Monetary Policy in a Small Open Economy

Number: 
852
Published: 
Classification JEL: 
E44, E50, E52, E58, F41
Keywords: 
Human capital agglomeration, Social returns, Private returns, Externalities, Uncertainty, Fiscal policy
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In this paper we set up a small open economy model with financial frictions, following Curdia and Woodford (2010)’s model. Unlike other results in the literature such as Curdia and Woodford (2010), McCulley and Ramin (2008) and Taylor (2008), we find that