I construct and analyse an example of an economy with production and money under conditions of uncertainty, assymetric information, and an incomplete asset market. For alternative scenarios, which differ in the information available to consumers and firms, I compute the equilibrium prices and...

The paper assesses whether the exchange rate is affected by monetary policy and whether these effects are permanent or transitory. The paper takes the position that the exchange rate regime determines the flexibility of monetary policy.

By employing the techniques of multivariate cointegration and error-correction models, we investigate the impact of the creation of the European Monetary System (EMS) on the exports of the four largest EU countries to each other. Our findings suggest that the impact of the EMS on bilateral...

This paper presents evidence that the existence of deposit and lending facilities combined with an averaging provision for the reserve requirement are powerful tools to stabilize the overnight rate.

This paper presents a benchmark model that rationalizes the choice of the degree of exchange rate flexibility. We show that the monetary authority may gain efficiency by reducing volatility of both the exchange rate and the interest rate at the same time. Furthermore, the model is consistent...

We consider optimal monetary policy in New Keynesian models with inertia. First order conditions, which we call the MJB-alternative, are found to improve upon the timeless perspective. The MJB-alternative is shown to be the best possible in the sense that it minimizes policymakers' unconditional...