The recent financial crises have generated interest in the design of optimal monetary policy rules not only for the developed economies, but also for the emerging economies. In particular, many economists have argued that economic models should take financial market frictions more seriously to...

This paper sets up a canonical new Keynesian small open economy model with nominal price rigidities to explore the impact of habit persistence and exchange rate pass-through on the welfare ranking of alternative monetary policy rules. It identifies three factors that can affect the welfare...

This paper sets up a canonical new Keynesian small open economy model with nominal price rigidities to explore the impact of habit persistence and exchange rate pass-through on the welfare ranking of alternative monetary policy rules. It identifies three factors that can affect the welfare...