This paper builds a DSGE model for a small open economy (SOE) in which the central bank systematically intervenes both the domestic currency bond and the FX markets using two policy rules: a Taylor-type rule and a second rule in which the operational target is the rate of nominal currency...

This paper builds a DSGE model for a small open economy (SOE) in which the central bank intervenes the domestic currency bond and FX markets using two policy rules: a Taylor-type rule and a rule that determines the rate of nominal depreciation. The 2 'corner' regimes, in which only one policy...

A traditional way of thinking about the exchange rate regime and capital account openness has been framed in terms of the 'impossible trinity' or 'trilemma', according to which policymakers can only have two of three possible outcomes: open capital markets, monetary independence and pegged...

A traditional way of thinking about the exchange rate (XR) regime and capital account openness has been framed in terms of the 'impossible trinity' or 'trilemma', in which policymakers can only have 2 of 3 possible outcomes: open capital markets, monetary independence and pegged XRs. This paper...

This paper builds a DSGE model for a SOE in which the central bank systematically intervenes both the domestic currency bond and the FX markets using two policy rules: a Taylor-type rule and a second rule in which the operational target is the rate of nominal currency depreciation. For this, the...