The adoption of a Taylor-type monetary policy rule and an inflation target for emerging market economies that choose a flexible exchange rate regime is often advocated. This paper investigates the issue of exchange rate determination when interest-rate feedback rules are implemented in a...

The aim of this chapter is to map out the macroeconomic effects of a sustained debt-deflation within a small open economy. We build a 2 country stock flow consistent model, and show the effects of a debt-deflation cycle on households, firms, banks, the government, and the central bank in each...

We study the ability of exclusion and sign restrictions to measure monetary policy shocks in small open economies. Our Monte Carlo experiments show that sign restrictions systematically overshoot inflation responses to the said shock, so we propose to add prior information to limit the number of...