In this paper we study the role of the exchange rate in conducting monetary policy in an economy with near-zero nominal interest rates as experienced in Japan since the mid-1990s. Our analysis is based on an estimated model of Japan, the United States and the euro area with rational expectations...

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...

We apply an in nite horizon intertemporal optimization model to a simple speculative attack framework. Thereby, the central bank faces a one control two-state variables optimization problem with endogenuous exit. By setting the interest rate the central bank can stimulate the economy or fend o...

This paper analyses the implications of imperfect exchange rate pass-through for optimal monetary policy in a linearised open-economy dynamic general equilibrium model calibrated to euro area data. Imperfect exchange rate pass through is modeled by assuming sticky import price behaviour. The...

We develop a model of monetary policy with a small departure from the basic New Keynesian (NK) model. In this model, the central bank can set the interest rate on bank reserves and the nominal stock of bank reserves independently, because these reserves reduce the costs of banking (i.e., have a...

We assess how non-orthodox monetary policy of an economy with multiple currency practices impacts growth and development. The central bank employs two monetary instruments: i) adjustment of the official exchange rate and ii) adjustment of nominal monetary base growth to stabilize the economy...

A Post Keynesian model is developed to examine the main features and consequences of a monetary regime based on inflation targeting. The growth performance of this regime is compared to the one resulting from real exchange rate targets. Inflation targeting is shown to hurt growth and employment...

In this paper, we examine whether financial spillovers from the European Central Bank's monetary policy have consequences for the effectiveness of domestic monetary policy in three small open economies (SOEs) that are highly integrated with the European (Monetary) Union: Denmark, Norway, and...

We develop a model of monetary policy with a simple departure from the basic New Keynesian (NK) model. In this model, the central bank sets independently the interest rate on bank reserves and the nominal stock of bank reserves. Because reserves reduce the costs of banking, the model delivers...