Teaching New Keynesian Open Economy Macroeconomics at the Intermediate Level

40 Pages Posted: 19 Dec 2005

See all articles by Peter Bofinger

Peter Bofinger

University of Würzburg - Institute of Economics and Social Sciences

Eric Mayer

University of Würzburg - Institute of Economics and Social Sciences

Timo Wollmershaeuser

Ifo Institute for Economic Research; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: August 9, 2005

Abstract

For the open economy the workhorse model in intermediate textbooks still is the Mundell-Fleming model, which basically extends the IS-LM model to open economy problems. The purpose of this paper is to present a simple New Keynesian model of the open economy, that introduces open economy considerations into the closed economy consensus version and that still allows for a simple and comprehensible analytical and graphical treatment. Above all, our model provides an efficient tool kit for the discussion of the costs and benefits of fixed and flexible exchange rates, which also was at the core of the Mundell-Fleming model.

Keywords: open economy, inflation targeting, monetary policy rules, New Keynesian macroeconomics

JEL Classification: A20, E10, E50, F41

Suggested Citation

Bofinger, Peter and Mayer, Eric and Wollmershaeuser, Timo, Teaching New Keynesian Open Economy Macroeconomics at the Intermediate Level (August 9, 2005). Available at SSRN: https://ssrn.com/abstract=870468 or http://dx.doi.org/10.2139/ssrn.870468

Peter Bofinger

University of Würzburg - Institute of Economics and Social Sciences ( email )

Sanderring 2
Wuerzburg, 97070
Germany
+49 931 312 944/5 (Phone)
+49 931 312 775 (Fax)

Eric Mayer

University of Würzburg - Institute of Economics and Social Sciences ( email )

Sanderring 2
Wuerzburg, 97070
Germany

Timo Wollmershaeuser (Contact Author)

Ifo Institute for Economic Research ( email )

Poschingerstrasse 5
Munich, 81879
Germany
+49 89 9224 1406 (Phone)
+49 89 9224 1462 (Fax)

HOME PAGE: http://www.ifo.de/link/wollmershaeuser_t.htm

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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