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Interest Rate Rules, Inflation Stabilization, and Imperfect Credibility : The Small Open Economy Case
Calvo, Guillermo A. - 2007
The paper examines the robustness of Interest Rate Rules, IRRs, in the context of an imperfectly credible stabilization program, closely following the format of much of the literature in open-economy models, e.g., Calvo and Végh (1993 and 1999). A basic result is that IRRs, like Exchange Rate...
Persistent link: https://www.econbiz.de/10012465476
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Optimal Interest Rate Policy in a Small Open Economy
Parrado, Eric - 2002
Using an optimizing model we derive the optimal monetary and exchange rate policy for a small stochastic open economy with imperfect competition and short run price rigidity. The optimal monetary policy has an exact closed-form solution and is obtained using the utility function of the...
Persistent link: https://www.econbiz.de/10012469994
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Fiscal Histories
Cochrane, John H. - National Bureau of Economic Research - 2022
The fiscal theory states that inflation adjusts so that the real value of government debt equals the present value of … fiscal theory to interpret historical episodes, including the rise and fall of inflation in the 1970s and 1980s, the long … pegs, the ends of hyperinflations, currency crashes, and the success of inflation targets. Going forward, fiscal theory …
Persistent link: https://www.econbiz.de/10013361983
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Helicopter Drops and Liquidity Traps
Amador, Manuel; Bianchi, Javier - National Bureau of Economic Research - 2023
We show that if the central bank operates without commitment and faces constraints on its balance sheet, helicopter drops can be a useful stabilization tool during a liquidity trap. With commitment, even with balance sheet constraints, helicopter drops are irrelevant
Persistent link: https://www.econbiz.de/10014247967
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Monetary Policy When the Central Bank Shapes Financial-Market Sentiment
Kashyap, Anil K.; Stein, Jeremy C. - National Bureau of Economic Research - 2022
Recent research has found that monetary policy works in part by influencing the risk premiums on both traded financial-market securities and intermediated loans. Research has also shown that when risk premiums are compressed, there is an increased likelihood of a reversal that damages the...
Persistent link: https://www.econbiz.de/10013477243
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Pandemic, War, Inflation : Oil Markets at a Crossroads?
Baumeister, Christiane - National Bureau of Economic Research - 2023
The COVID-19 pandemic as well as the Russian invasion of Ukraine have had profound effects on the global energy landscape, with some of the longer-lasting effects still unfolding. This paper discusses how these events have reshaped the supply side of the global oil market by focusing on...
Persistent link: https://www.econbiz.de/10014322883
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Delaying the Inevitable : Optimal Interest Rate Policy and BOP Crises
Lahiri, Amartya - 2000
The classical model of balance of payments crises implicitly assumes that the central bank sits passively as international reserves dwindle. In practice, however, central banks typically defend pegs aggressively by raising short-term interest rates. This paper analyzes the feasibility and...
Persistent link: https://www.econbiz.de/10012471016
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How Should Monetary Policy be Conducted in an Era of Price Stability?
Svensson, Lars E.O. - 2000
The paper discusses several issues related to how monetary policy should be conducted in an era of price stability. Low inflation (with base drift in the price level) and price-level stability (without such base drift) are compared, and a suitable loss function (corresponding to flexible...
Persistent link: https://www.econbiz.de/10012471258
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Optimal Monetary Policy Inertia
Woodford, Michael - 1999
This paper considers the desirability of the observed tendency of central banks to adjust interest rates only gradually in response to changes in economic conditions. It shows, in the context of a simple model of optimizing private-sector behavior, that such inertial policy can be optimal. The...
Persistent link: https://www.econbiz.de/10012471529
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The Equilibrium Degree of Transparency and Control in Monetary Policy
Faust, Jon - 1999
We examine a central bank's endogenous choice of degree of control and degree of transparency, under both commitment and discretion. Under commitment, we find that the deliberate choice of sloppy control is far less likely under a standard central-bank loss function than reported for a less...
Persistent link: https://www.econbiz.de/10012471635