Caution Or Activism? Monetary Policy Strategies In An Open Economy
We examine optimal policy in an open-economy model with uncertainty and learning, where monetary policy actions affect the economy through the real exchange rate channel. Our results show that the degree of caution or activism in optimal policy depends on whether central banks are in coordinated or uncoordinated equilibrium. If central banks coordinate their policy actions then activism is optimal. In contrast, if there is no coordination, caution prevails. In the latter case caution is optimal because it helps central banks to avoid exposing themselves to manipulative actions by other central banks
(This abstract was borrowed from another version of this item.)
Volume (Year): 11 (2007)
Issue (Month): 04 (September)
|Contact details of provider:|| Postal: |
Web page: http://journals.cambridge.org/jid_MDY
References listed on IDEAS
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.:
- Frankel, Jeffrey A & Rockett, Katharine E, 1988. "International Macroeconomic Policy Coordination When Policymakers Do Not Agree on the True Model," American Economic Review, American Economic Association, vol. 78(3), pages 318-40, June.
- Kiefer, Nicholas M & Nyarko, Yaw, 1989. "Optimal Control of an Unknown Linear Process with Learning," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(3), pages 571-86, August.
- Wieland, Volker, 2000.
"Learning by doing and the value of optimal experimentation,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 24(4), pages 501-534, April.
- Volker Wieland, 1996. "Learning by doing and the value of optimal experimentation," Finance and Economics Discussion Series 96-5, Board of Governors of the Federal Reserve System (U.S.).
- Balvers, Ronald J & Cosimano, Thomas F, 1994. "Inflation Variability and Gradualist Monetary Policy," Review of Economic Studies, Wiley Blackwell, vol. 61(4), pages 721-38, October.
- Basar, T & Salmon, Mark, 1989.
"Credibility and the Value of Information Transmission in a Model of Monetary Policy and Inflation,"
CEPR Discussion Papers
338, C.E.P.R. Discussion Papers.
- Basar, Tamer & Salmon, Mark, 1990. "Credibility and the value of information transmission in a model of monetary policy and inflation," Journal of Economic Dynamics and Control, Elsevier, vol. 14(1), pages 97-116, February.
- Basar, Tamer & Salmon, Mark, 1987. "Credibility and the Value of Information Transmission in a Model of Monetary Policy and Inflation," The Warwick Economics Research Paper Series (TWERPS) 289, University of Warwick, Department of Economics.
- Wieland, Volker, 2000.
"Monetary policy, parameter uncertainty and optimal learning,"
Journal of Monetary Economics,
Elsevier, vol. 46(1), pages 199-228, August.
- Volker Wieland, 1999. "Monetary policy, parameter uncertainty and optimal learning," Finance and Economics Discussion Series 1999-48, Board of Governors of the Federal Reserve System (U.S.).
- Wieland, Volker, 1999. "Monetary policy, parameter uncertainty and optimal learning," ZEI Working Papers B 09-1999, ZEI - Center for European Integration Studies, University of Bonn.
- Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, June.
- Svensson, Lars E O, 1999.
"Price-Level Targeting versus Inflation Targeting: A Free Lunch?,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 31(3), pages 277-95, August.
- Svensson, Lars E O, 1996. "Price-level Targeting versus Inflation Targeting: A Free Lunch?," CEPR Discussion Papers 1510, C.E.P.R. Discussion Papers.
- Ghosh, Atish R & Masson, Paul R, 1991. "Model Uncertainty, Learning, and the Gains from Coordination," American Economic Review, American Economic Association, vol. 81(3), pages 465-79, June.
- Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608, June.
- Bertocchi, Graziella & Spagat, Michael, 1993.
"Learning, experimentation, and monetary policy,"
Journal of Monetary Economics,
Elsevier, vol. 32(1), pages 169-183, August.
- Bertocchi, Graziella & Spagat, Michael, 1991. "Learning, Experimentation and Monetary Policy," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1991018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Ellison, Martin & Vilmunen, Jouko, 2005. "A simple approach to identifying the incentives for policy experimentation," Economics Letters, Elsevier, vol. 86(2), pages 167-172, February.
When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:11:y:2007:i:04:p:519-541_06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.