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Monetary Policy and Exchange Rate Volatility in a Small Open Economy

Gali, Jordi - 2002

We lay out a small open economy version of the Calvo sticky price model, and show how the equilibrium dynamics can be reduced to a tractable canonical system in domestic inflation and the output gap. We employ this framework to analyze the macroeconomic implications of three alternative monetary...

Persistent link: https://www.econbiz.de/10012469809

The Advantage of Transparent Instruments of Monetary Policy

Atkeson, Andrew - 2001

Is the exchange rate or the money growth rate the better instrument of monetary policy? A common argument is that the exchange rate has a natural advantage because it is more transparent: it is easier for the public to monitor than the money growth rate. We formalize this argument in a simple...

Persistent link: https://www.econbiz.de/10012470034

Exchange Rate and Inflation Under Weak Monetary Policy : Turkey Verifies Theory

Gürkaynak, Refet S.; Kısacıkoğlu, Burçin; Lee, … - 2022

For the academic audience, this paper presents the outcome of a well-identified, large change in the monetary policy rule from the lens of a standard New Keynesian model and asks whether the model properly captures the effects. For policymakers, it presents a cautionary tale of the dismal...

Persistent link: https://www.econbiz.de/10014083478

Exchange Rate Models are Better than You Think, and Why They Didn't Work in the Old Days

Engel, Charles; Wu, Steve P. Y. - National Bureau of Economic Research - 2024

Exchange-rate models fit very well for the U.S. dollar in the 21st century. A "standard" model that includes real interest rates and a measure of expected inflation for the U.S. and the foreign country, the U.S. comprehensive trade balance, and measures of global risk and liquidity demand is...

Persistent link: https://www.econbiz.de/10015056131

Exchange Rates and Uncovered Interest Differentials : The Role of Permanent Monetary Shocks

Schmitt-Grohé, Stephanie - 2018

We estimate an empirical model of exchange rates with transitory and permanent monetary shocks. Using monthly post-Bretton-Woods data from the United States, the United Kingdom, and Japan, we report four main findings: First, there is no exchange rate overshooting in response to either temporary...

Persistent link: https://www.econbiz.de/10012481028

Current Account Dynamics and Monetary Policy

Ferrero, Andrea - 2008

We explore the implications of current account adjustment for monetary policy within a simple two-country DSGE model. Our framework nests Obstfeld and Rogoff's (2005) static model of exchange rate responsiveness to current account reversals. It extends this approach by endogenizing the dynamic...

Persistent link: https://www.econbiz.de/10012464741

The Relationship Between Exchange Rates and Inflation Targeting Revisited

Edwards, Sebastian - 2006

: first, I analyze the effectiveness of nominal exchange rates as shock absorbers in countries with inflation targeting. This …

Persistent link: https://www.econbiz.de/10012466531

Identifying the Effects of Monetary Policy Shocks on Exchange Rates Using High Frequency Data

Faust, Jon - 2003

This paper proposes a new approach to identifying the effects of monetary policy shocks in an international vector autoregression. Using high-frequency data on the prices of Fed Funds futures contracts, we measure the impact of the surprise component of the FOMC-day Federal Reserve policy...

Persistent link: https://www.econbiz.de/10012469038

Some Empirical Evidence on the Effects of Monetary Policy Shocks on Exchange Rates

Eichenbaum, Martin - 1993

rates. The temporal pattern of the depreciation in U.S. nominal exchange rates following a positive monetary policy shock is …

Persistent link: https://www.econbiz.de/10012474691

Monetary Policy without Moving Interest Rates : The Fed Non-Yield Shock

Boehm, Christoph E.; Kroner, T. Niklas - National Bureau of Economic Research - 2024

-announcement times. We use a heteroskedasticity-based procedure to estimate a "Fed non-yield shock", which is orthogonal to yield changes … and is identified from excess volatility in the S&P 500 and various dollar exchange rates. A positive non-yield shock …-yield shock is essentially uncorrelated with previous monetary policy shocks and its effects are large in comparison. Its strong …

Persistent link: https://www.econbiz.de/10014576665

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