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...Abayesian look at new open economy macroeconomics thomas lubik frank schorfheide johns hopkins university of pennsylvania may abstract this paper develops a small scale two country model following the macroeco nomics paradigm under autarky specializes to familiar three equation keynesian dynamic stochastic general equilibrium dsge we discuss challenges successful estima tion models potential misspecication and identication problems argue that prior distributions bayesian estimation techniques are useful cope with these apply t it data from u s euro area compare parameter estimates closed specications study sensitivity choice distribution examine propagation monetary policy shocks assess ability explain exchange rate movements thomaslubik departmentofeconomics johnshopkinsuniversity mergenthaler hall n charles street baltimore md email jhu edu department economics locust walk philadelphia pa schorf ssc upenn part research was conducted while visiting york for whose hospitality he is gra...