English, Article, Journal or magazine article edition: Central Bank Learning, Terms of Trade Shocks & Currency Risk: Should Exchange Rate Volatility Matter for Monetary Policy? G.C. Lim; Paul D. McNelis

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/74142
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Central Bank Learning, Terms of Trade Shocks &​ Currency Risk: Should Exchange Rate Volatility Matter for Monetary Policy?
Author
  • G.C. Lim
  • Paul D. McNelis
Physical Description
  • preprint
Notes
  • This paper examines the role of interest rate policy in a small open economy subject to terms of trade shocks and time-varying currency risk responding to domestic exchange rate volatility. The private sector makes optimal decisions in an intertemporal non-linear setting with rational,forward-looking expectations. In contrast,the monetary authority practices least-squares learning about the evolution of inflation, output growth, and exchange rate depreciation in alternative policy scenarios. Interest rates are set by linear quadratic optimization, with the objectives for inflation, output growth, or depreciation depending on current conditions. The simulation results show that the preferred stance is one which targets inflation and growth, not inflation only nor inflation, growth and depreciation. Including exchange rate changes as targets significantly increases output variability, but marginally reduces inflation variability.
  • Currency risk, learning, parameterized expectations, policy targets
  • RePEc:boc:bocoec:509
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