Can active Taylor rules (i.e. monetary rules where the nominal interest rate responds more than proportionally to inflation) deliver global equilibrium uniqueness in small open economies? By studying the local and global dynamics of a standard small open economy we point out the misleading...

This paper uses the open economy structural VAR model developed in Buckle, Kim, Kirkham, McLellan and Sharma (2002) to evaluate the impact of monetary policy on New Zealand business cycles and inflation variability and the output/inflation variability trade-off. The model includes a...

We study a model with a durable good subject to abrupt, periodic obsolescence, and characterize the optimal purchasing policy. Consumers optimally synchronize new purchases with the arrival of new durable models. Hence, some agents use a "flexible" optimal replacement rule that switches between...

This paper examines the relationship of business cycles, the terms of trade and Tobin's q using a three-sector dynamic stochastic general equilibrium model for a small open economy. Results show that terms of trade shocks account for half of actual volatility of GDP and stock market indices for...

This study examines the dynamics associated with an economy implementing an Exchange Rate Based Stabilization (ERBS) programs when they are subject to sudden restrictions in international capital flows. In the context of a simple theoretical model, we describe the pressures on a country's...

The research addresses three methodological questions that are central to effective exchange rate and macroeconomic management: what are the determinants and how to model the real exchange rate (RER), how to estimate its equilibrium level, and how to quantify the likely impact of misalignment on...

This paper uses a two-country, monetary general equilibrium model with imperfect competition to study the optimal rate of inflation in an open economy. In contrast with the closed economy literature, when policy is set non-cooperatively in the open economy, the optimality of the Friedman rule --...

In this paper, we consider a dynamic New Keynesian model of the small open economy in the light of bounded rationality. This entails private agents and the central bank updating their beliefs about the laws of motion of inflation, the output gap and real exchange rate when forming their optimal...

We compare the performance of a currency board, inflation targeting, and dollarization in a small, open developing economy with a liberalized capital account. We focus on the transmission of shocks to currency and country risk premia and on the role of fluctuations in premia in the propagation...

The purpose of this paper is to examine whether the stock wealth effect of consumption exhibits structural change(s) or behaves asymmetrically over business cycles. We first perform a general test of linearity for the behavior of aggregate consumption in response to changes in stock wealth based...