We examine optimal policy in an open-economy model with uncertainty and learning, where monetary policy actions affect the economy through the real exchange rate channel. Our results show that the degree of caution or activism in optimal policy depends on whether central banks are in coordinated...

Recently, several countries have been considered the relative merits of "dollarization", that is, adopting the currency of an anchor country. One of the main potential costs of dollarization is that macroeconomic stability may be reduced by the loss of monetary policy autonomy. In this paper, we...

Czech Republic, Hungary and Poland will have to join the European and Monetary Union. Surprisingly, there is very little work on the welfare consequences of the loss of monetary policy flexibility for these countries. This paper fills this void by providing a framework to evaluate quantitatively...

An important feature of transition economies such as the Central and Eastern European countries is the so-called phenomenon of dollarization. It is of particular interest since extensive currency substitution not only makes domestic monetary and fiscal policies less effective, it also makes...

For policymakers, thinking about best practice monetary policy means thinking about uncertainty. Open economy monetary policymakers face an additional source of uncertainty – exchange rate dynamics. This paper identifies policy rules robust to the open economy inflation targeters face in...

This paper studies the choice of the monetary regime in a small open economy with special focus on the EMU accession countries. In the framework of a two - country DSGE model we conduct policy experiments consisting in analysing the effects of different monetary regimes (roughly representing the...

Previous efforts to compare the costs and benefits of fixed versus flexible exchange rate regimes have ignored the fact that it takes significant resources and time to develop export markets, and they have not included an analysis of the firm-level decision to enter or exit export markets. This...

This paper presents a new argument for international monetary policy coordination based on considerations of structural asymmetries across countries. In a two-country world with a traded and a non-traded sector in each country, optimal independent monetary policy cannot replicate the...

In this paper we assess the stability of open economy backward looking Phillips curves estimated across two different exchange rate regimes. The time series we deal with come from the simulation of a New-Keynesian hybrid model suited for performing monetary policy analysis. The statistical...