English, Article, Journal or magazine article edition: Optimal Monetary Policy and Exchange Rate Volatility in a Small Open Economy Jordi Gali; Tommaso Monacelli

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/73483
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Optimal Monetary Policy and Exchange Rate Volatility in a Small Open Economy
Author
  • Jordi Gali
  • Tommaso Monacelli
Physical Description
  • preprint
Notes
  • We lay out a tractable small open economy version of the canonical sticky price model, and use it as a framework to study the properties of three alternative monetary regimes: (a) optimal monetary policy, (b) a Taylor rule, and (c) an exchange rate peg. Several interesting results emerge from our analysis. First, the optimal policy is shown to entail a positive correlation between domestic and world interest rates. That doesnêt prevent sizable fluctuations of nominal and real exchange rates from occurring, though the implied volatility of those variables is much smaller than the empirical one. Second, a Taylor rule generally leads to excess volatility of nominal variables, and excess smoothness of real variables, relative to the optimal policy. Finally, we show that a pure exchange rate peg causes the equilibrium to be indeterminate and may thus be a source of macroeconomic instability.
  • small open economy, optimal monetary policy, sticky prices, Taylor rule
  • RePEc:boc:bocoec:438
Language
  • English
Contributed by
OAIster

Get this edition

Other links

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment