Policy Responses to Exchange-rate Movements
AbstractThis paper examines policy responses to exchange-rate movements in a simple model of an open economy. The optimal response of monetary policy to an exchange-rate change depends on the source of the change: on whether the underlying shock is a shift in capital flows, manufactured exports, or commodity prices. The paper compares the modelâs prescriptions to the policies of an actual central bank, the Bank of Canada. Finally, the paper considers the role of fiscal policy in an open economy. Coordinated fiscal and monetary responses to exchange-rate movements stabilize output at the sectoral as well as aggregate level.
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Bibliographic InfoArticle provided by Springer in its journal Open Economies Review.
Volume (Year): 21 (2010)
Issue (Month): 2 (April)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100323
Exchange rates; Monetary policy; Bank of Canada; E52; E63; F41;
Other versions of this item:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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