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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/10005504393
Under the assumption of no arbitrage, exchange rate target-zone credibility is tested by whether domestic interest rates fall within `rate-of-return bands' between the maximum and minimum home-currency rate of return on a foreign investment in the absence of a devaluation. Under the assumption...
Persistent link: https://www.econbiz.de/10005791263
The use of forward interest rates as a monetary policy indicator is demonstrated, using Sweden between 1992 and 1994 as an example. The forward rates are interpreted as indicating market expectations of the time-path of future interest rates, future inflation rates, and future currency...
Persistent link: https://www.econbiz.de/10005123801
This paper considers a new approach to the optimal management and analysis of exchange rate target zones by regarding the operation of a target zone as a dynamic signalling game between the monetary authorities and the financial markets. A Sequential Open Loop (Feedback) policy of sterilized...
Persistent link: https://www.econbiz.de/10005123996