Exchange rates, monetary policy regimes, and beliefs
AbstractThe authors investigate an international monetary business-cycle model in which agents face monetary policy processes that incorporate regime shifts. In any given period agents cannot directly observe the policy regime, but instead form beliefs that are updated via Bayesian learning. As a result, expectation adjustment displays inertia that adds persistence to the effects of monetary shocks. Monetary policy process for the U.S. and an aggregate of OECD countries are estimated using Hamilton's Markov-switching model. The authors then solve and calibrate a version of the model and examine its quantitative properties.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 99-6.
Date of creation: 1999
Date of revision:
Other versions of this item:
- Keith Sill & Jeff Wrase, 2000. "Exchange Rates, Monetary Policy Regimes, and Beliefs," Econometric Society World Congress 2000 Contributed Papers 1701, Econometric Society.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lawrence J. Christiano, 1990. "Computational algorithms for solving variants of Fuerst's model," Working Papers 467, Federal Reserve Bank of Minneapolis.
- David Andolfatto & Paul Gomme, 2003.
"Monetary Policy Regimes and Beliefs,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 1-30, February.
- David Andolfatto & Paul Gomme, 2001. "Monetary policy regimes and beliefs," Working Paper 9905, Federal Reserve Bank of Cleveland.
- David Andolfatto & Paul Gomme, 1997. "Monetary policy regimes and beliefs," Discussion Paper / Institute for Empirical Macroeconomics 118, Federal Reserve Bank of Minneapolis.
- David Andolfatto & Paul Gomme, 1997. "Monetary Policy Regimes and Beliefs," Cahiers de recherche CREFE / CREFE Working Papers 48, CREFE, Université du Québec à Montréal, revised Apr 2001.
- David Andolfatto & Paul Gomme, 1997. "Monetary Policy Regimes and Beliefs," Working Papers 97002, University of Waterloo, Department of Economics, revised Jan 1997.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1998.
"Sticky price models of the business cycle: can the contract multiplier solve the persistence problem?,"
217, Federal Reserve Bank of Minneapolis.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," Econometrica, Econometric Society, vol. 68(5), pages 1151-1180, September.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1996. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," NBER Working Papers 5809, National Bureau of Economic Research, Inc.
- Obstfeld, M., 1998.
"Risk and Exchange Rate,"
193, Princeton, Woodrow Wilson School - Public and International Affairs.
- Maurice Obstfeld & Kenneth Rogoff, 1996.
"Exchange Rate Dynamics Redux,"
NBER Working Papers
4693, National Bureau of Economic Research, Inc.
- Maurice Obstfeld and Kenneth Rogoff., 1995. "Exchange Rate Dynamics Redux," Center for International and Development Economics Research (CIDER) Working Papers C95-048, University of California at Berkeley.
- Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," CEPR Discussion Papers 1131, C.E.P.R. Discussion Papers.
- Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
- Martin Eichenbaum & Charles L. Evans, 1993.
"Some Empirical Evidence on the Effects of Monetary Policy Shocks on Exchange Rates,"
NBER Working Papers
4271, National Bureau of Economic Research, Inc.
- Martin Eichenbaum & Charles Evans, 1992. "Some empirical evidence on the effects of monetary policy shocks on exchange rates," Working Paper Series, Macroeconomic Issues 92-32, Federal Reserve Bank of Chicago.
- Schlagenhauf, Don E. & Wrase, Jeffrey M., 1995.
"Liquidity and real activity in a simple open economy model,"
Journal of Monetary Economics,
Elsevier, vol. 35(3), pages 431-461, June.
- Don E. Schlagenhauf & Jeffrey M. Wrase, 1992. "Liquidity and real activity in a simple open economy model," Discussion Paper / Institute for Empirical Macroeconomics 57, Federal Reserve Bank of Minneapolis.
- Betts, Caroline & Devereux, Michael B., 2000. "Exchange rate dynamics in a model of pricing-to-market," Journal of International Economics, Elsevier, vol. 50(1), pages 215-244, February.
- Schlagenhauf, Don E. & Wrase, Jeffrey M., 1995. "Exchange rate dynamics and international effects of monetary shocks in monetary, equilibrium models," Journal of International Money and Finance, Elsevier, vol. 14(2), pages 155-177, April.
- Gerberding, Christina, 2001. "The information content of survey data on expected price developments for monetary policy," Discussion Paper Series 1: Economic Studies 2001,09, Deutsche Bundesbank, Research Centre.
- Ryo Horii & Yoshiyasu Ono, 2004. "Learning, Liquidity Preference, and Business Cycle," ISER Discussion Paper 0601, Institute of Social and Economic Research, Osaka University.
- Keith Sill & Jeffrey Wrase, 1999. "Solving and simulating a simple open-economy model with Markov-switching driving processes and rational learning," Working Papers 99-14, Federal Reserve Bank of Philadelphia.
- Ryo Horii & Yoshiyasu Ono, 2005. "Financial Crisis and Recovery: Learning-based Liquidity Preference Fluctuations," Macroeconomics 0504016, EconWPA.
- Ryo Horii & Yoshiyasu Ono, 2006. "Learning, Inflation Cycles, and Depression," Discussion Papers in Economics and Business 06-14, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Beth Paul).
If references are entirely missing, you can add them using this form.