June 2021 issue contents
Optimal Monetary Policy in Small Open Economies: Producer-Currency Pricing

Mikhail Dmitrieva and Jonathan Hoddenbaghb


We establish the share of exports in production as a sufficient statistic for optimal noncooperative monetary policy. Under financial autarky, markups positively co-move with the export share. For complete markets, markups should be procyclical if the export share is procyclical. When central banks cooperate, markups are constant under complete markets, and countercyclical under financial autarky.

JEL Code: E50, F41, F42.

Full article (PDF, 42 pages, 354 kb)
Online appendix (PDF, 28 pages, 224 kb)

a  Florida State University
b  Johns Hopkins University