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Optimal monetary policy with a regime-switching exchange rate in a forward-looking model Author info | Abstract | Publisher info | Download info | Related research | Statistics Fernando Alexandre (NIPE and niversidade do Minho)
Pedro Bação () (GEMF and Faculdade de Economia, Universidade de Coimbra)
John Driffill () (Birkbeck College, University of London)
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We evaluate the macroeconomic performance of different monetary policy rules when there is exchange rate uncertainty. We do this in the context of a non-linear rational expectations model. The exchange rate is allowed to deviate from its fundamental value and the persistence of the deviation is modeled as a Markov switching process. Our results suggest that taking into account the switching nature of the economy is important only in extreme cases.
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Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number
2007-09.
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Length: 54 pages
Date of creation: 2007Date of revision:
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Keywords: Exchange Rates Monetary Policy Markov Switching Other versions of this item:
Find related papers by JEL classification: E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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references Cited by : (explanations , 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.)
Fernando Alexandre & Vasco J. Gabriel & Pedro Bação, 2008.
"Taylor-type rules versus optimal policy in a Markov-switching economy ,"
NIPE Working Papers
15/2008, NIPE - Universidade do Minho.
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