Optimal Monetary Policy in a Multi-Sector Small Open Economy Model ∗

@inproceedings{Resende2008OptimalMP,
  title={Optimal Monetary Policy in a Multi-Sector Small Open Economy Model ∗},
  author={Carlos Resende and A. F. Dib and Maral Kichian},
  year={2008}
}
In an influential paper, Aoki (2001) used a closed-economy setup with two sectors – with flexible and sticky prices, respectively – to conclude that it is optimal for inflationtargeting central banks to react only to the inflation rate of the sector with the highest degree of price rigidity. Aoki’s paper also implies that targeting aggregate “average… CONTINUE READING