Monetary policy rules and the exchange rate channel
A discretionary monetary policy leads to suboptimal stabilization in models with the New Keynesian assumption of forward-looking price setting, and various policy rules that improve the discretionary equilibrium have been considered in the literature. The empirical evidence for forward-looking price determination is mixed. This note shows, however, that forward-looking price setting is not essential for the results. Policy rules that improve welfare under the New Keynesian assumptions, also do so within a traditional backward-looking model if asset prices, such as the exchange rate, are forward-looking.
Year of publication: |
2005
|
---|---|
Authors: | Leitemo, Kai ; Røisland, Øistein ; Torvik, Ragnar |
Published in: |
Applied Financial Economics. - Taylor & Francis Journals, ISSN 0960-3107. - Vol. 15.2005, 16, p. 1165-1170
|
Publisher: |
Taylor & Francis Journals |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Monetary policy rules and the exchange rate channel
Leitemo, Kai, (2005)
-
Time inconsistency and the exchange rate channel of monetary policy
Leitemo, Kai, (2002)
-
Monetary policy rules and the exchange rate channel
Leitemo, Kai, (2005)
- More ...