Increasing financial integratio nchallenges the optimal ityofinward-looking strategies for optimal monetary policy. Those issuesare analyzed in an open economy where foreign net lending, and the current account,are determined by a collateral...

How should monetary policy be optimally designed in an environment with high degrees of financial globalization? To answer this question we lay down an open economy model where net lending toward the rest of the world is constrained by a collateral...