In this paper, we consider a small open economy under the New Keynesian model with unemployment of Galí (2011a, b) to discuss the design of the monetary policy. Our findings can be summarized in three parts. First, even with the existence of unemployment, the optimal policy is to minimize...

This paper analyses the impact of central bank interven-tions in the inflation targeting regime. The results of empirical stud-ies in this paper show if there is a shock of the exchange rate, which would lead to depreciation of the exchange rate, a central bank may decide to mush instability on...

In this article, the issue of the monetary independence problem in view of the Romania's European Monetary Union accession is investigated empirically. It is frequently argued that for such a country, the main cost of participation in a currency area is the loss of monetary policy independence....

This paper analyses the effects of two alternative monetary strategies (exchange rate targeting and inflation targeting) on economic growth and employment. On the panel of 18 countries for the period from 1996 to 2013, I tested the hypothesis that countries in exchange rate targeting have a...

We study for a benchmark small open emerging economy an optimal robust monetary policy à la Hansen and Sargent (2003) considering additive model uncertainty. The robust control approach supposes that economic agents are not able to assign probabilities to a set of all plausible models and...

This paper examines whether in analysis of the impact of monetary policy, the exchange rate can play a role along with the interest rate as a transmission mechanism of monetary policy effects on economic variables or not? For this purpose, the general dynamic stochastic equilibrium models were...

High fluctuation of exchange rate in short horizon is obviously making economic activity more risky as uncertainty rises. As it is not good for the economy, then there should be a systematic and measured policy to mitigate the foreign exchange fluctuations and to minimize the fluctuations, as...

Changes in interest rates, inflation, and exchange rates are the main components of macroeconomic risks (financial risks) in projects evaluation. However, the conduct of monetary policy as well as its impact on the economic environment is seldom considered as an important component of...