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Money-based stabilization in a small open economy

  • Rhee, Hyuk Jae

We studied the effects of a credible money-based stabilization program under a flexible exchange rate regime in the context of New-Keynesian dynamic general equilibrium model for a small open economy. In this study, we successfully replicated the main stylized facts of money-based stabilization, a slow inflation convergence and an initial recession in domestic sector. In contrast with the previous results, however, a credible money-based disinflation in this model produces a sustained expansion in domestic sector after the initial contraction.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 30 (2008)
Issue (Month): 1 (March)
Pages: 462-480

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Handle: RePEc:eee:jmacro:v:30:y:2008:i:1:p:462-480
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