Teaching New Keynesian Open Economy Macroeconomics at the Intermediate Level

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 flexibl