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Delegating Optimal Monetary Policy Inertia in a Small-Open Economy

Delegating Optimal Monetary Policy Inertia in a Small-Open Economy AbstractThis paper explores the delegation of several targeting regimes in a small open new Keynesian (NK) model and examines how central banks overcome stabilization bias in a small open NK model. Results indicate that both speed limit and real exchange rate targeting can carry the isomorphic properties of optimal monetary policy over to the closed economy. In addition, neither nominal income growth targeting nor CPI inflation targeting replicates a commitment policy. These findings provide new implications for optimal monetary policy in an open economy. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The B.E. Journal of Macroeconomics de Gruyter

Delegating Optimal Monetary Policy Inertia in a Small-Open Economy

The B.E. Journal of Macroeconomics , Volume 21 (2): 35 – Jul 15, 2021

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Publisher
de Gruyter
Copyright
© 2020 Walter de Gruyter GmbH, Berlin/Boston
ISSN
1935-1690
eISSN
1935-1690
DOI
10.1515/bejm-2020-0181
Publisher site
See Article on Publisher Site

Abstract

AbstractThis paper explores the delegation of several targeting regimes in a small open new Keynesian (NK) model and examines how central banks overcome stabilization bias in a small open NK model. Results indicate that both speed limit and real exchange rate targeting can carry the isomorphic properties of optimal monetary policy over to the closed economy. In addition, neither nominal income growth targeting nor CPI inflation targeting replicates a commitment policy. These findings provide new implications for optimal monetary policy in an open economy.

Journal

The B.E. Journal of Macroeconomicsde Gruyter

Published: Jul 15, 2021

Keywords: optimal monetary policy; targeting regime; commitment; discretion; E52; E58; F41

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