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An Open Economy Model of the Euro Area and the US
E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
F4 - Macroeconomic Aspects of International Trade and Finance
Taking stock of the recent developments in the New Open Macroeconomics literature, we build a two country Dynamic Stochastic General Equilibrium (DSGE) model of the euro area and the US, with nominal rigidities and imperfect exchange rate passthrough. The model is calibrated using parameters found in the literature. In order to illustrate the model’s dynamics we simulate its response to a number of shocks.