Optimal Monetary Policy in Closed versus Open Economies: An Integrated Approach
AbstractThis paper develops a new open economy macro model of optimal monetary for a small open economy. Our main result is that in this model, the optimal policy problem for the small open economy is isomorphic to the closed economy case studied in Clarida, Gali, Gertler (1999). In particular, the optimal policy can be implemented with a Taylor Rule under which the domestic interest rate adjusts to the equilibrium real interest rate and expected inflation in domestic prices.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8604.
Date of creation: Nov 2001
Date of revision:
Publication status: published as Clarida, Richard, Jordi Gali and Mark Gertler. "Optimal Monetary Policy In Open Versus Closed Economies," American Economic Review, 2001, v91(2,May), 248-252.
Note: EFG IFM ME
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Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-11-21 (All new papers)
- NEP-CBA-2001-11-21 (Central Banking)
- NEP-MAC-2001-10-29 (Macroeconomics)
- NEP-MON-2001-11-21 (Monetary Economics)
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.:
- Mark Gertler & Jordi Gali & Richard Clarida, 1999.
"The Science of Monetary Policy: A New Keynesian Perspective,"
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- Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
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- Svensson, Lars E O, 1998. "Open-Economy Inflation Targeting," CEPR Discussion Papers 1989, C.E.P.R. Discussion Papers.
- Svensson, L.E.O., 1998. "Open-Economy Inflation Targeting," Papers 638, Stockholm - International Economic Studies.
- Giancarlo Corsetti & Paolo Pesenti, 2001.
"Welfare And Macroeconomic Interdependence,"
The Quarterly Journal of Economics,
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- Woodford, Michael, 1999. "Optimal monetary policy inertia," CFS Working Paper Series 1999/09, Center for Financial Studies (CFS).
- Jordi Gali & Tommaso Monacelli, 1999. "Optimal Monetary Policy and Exchange Rate Volatility in a Small Open Economy," Boston College Working Papers in Economics 438, Boston College Department of Economics, revised 15 Nov 1999.
- Benigno, Gianluca & Benigno, Pierpaolo, 2001. "Price Stability as a Nash Equilibrium in Monetary Open-Economy Models," CEPR Discussion Papers 2757, C.E.P.R. Discussion Papers.
- Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
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