Monetary policy rules and the exchange rate channel
A discretionary monetary policy leads to suboptimal stabilization in models with the New Keynesian assumption of forward-looking price setting, and various policy rules that improve the discretionary equilibrium have been considered in the literature. The empirical evidence for forward-looking price determination is mixed. This note shows, however, that forward-looking price setting is not essential for the results. Policy rules that improve welfare under the New Keynesian assumptions, also do so within a traditional backward-looking model if asset prices, such as the exchange rate, are forward-looking.
Volume (Year): 15 (2005)
Issue (Month): 16 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAFE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAFE20|
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.:
- Woodford, M., 1999.
"Optimal Monetary Policy Inertia.,"
666, Stockholm - International Economic Studies.
- Woodford, Michael, 2000. "Optimal Monetary Policy Inertia," Seminar Papers 666, Stockholm University, Institute for International Economic Studies.
- Michael Woodford, 1999. "Optimal Monetary Policy Inertia," NBER Working Papers 7261, National Bureau of Economic Research, Inc.
- Woodford, Michael, 1999. "Optimal monetary policy inertia," CFS Working Paper Series 1999/09, Center for Financial Studies (CFS).
- Nicoletta Batini & Andrew G Haldane, 1999.
"Forward-looking rules for monetary policy,"
Bank of England working papers
91, Bank of England.
- Bennett T. McCallum, 1997.
"The Alleged Instability of Nominal Income Targeting,"
NBER Working Papers
6291, National Bureau of Economic Research, Inc.
- Bennett T. McCallum, "undated". "The Alleged Instability of Nominal Income Targeting," GSIA Working Papers 1998-20, Carnegie Mellon University, Tepper School of Business.
- Bennett T. McCallum, 1997. "The alleged instability of nominal income targeting," Reserve Bank of New Zealand Discussion Paper Series G97/6, Reserve Bank of New Zealand.
- Henrik Jensen, "undated".
"Targeting Nominal Income Growth or Inflation?,"
EPRU Working Paper Series
99-23, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- Smets, Frank & Wouters, Raf, 2002.
"Openness, imperfect exchange rate pass-through and monetary policy,"
Working Paper Series
0128, European Central Bank.
- Smets, Frank & Wouters, Raf, 2002. "Openness, imperfect exchange rate pass-through and monetary policy," Journal of Monetary Economics, Elsevier, vol. 49(5), pages 947-981, July.
- Frank Smets & Raf Wouters, 2002. "Openness, imperfect exchange rate pass-through and monetary policy," Working Paper Research 19, National Bank of Belgium.
- Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
- Leitemo, Kai, 2004. "A game between the fiscal and the monetary authorities under inflation targeting," European Journal of Political Economy, Elsevier, vol. 20(3), pages 709-724, September.
- John M. Roberts, 1994.
"Is inflation sticky?,"
Working Paper Series / Economic Activity Section
152, Board of Governors of the Federal Reserve System (U.S.).
- Leitemo, Kai & Roisland, Oistein & Torvik, Ragnar, 2002. " Time Inconsistency and the Exchange Rate Channel of Monetary Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(3), pages 391-397, September.
- Dennis, Richard, 2001. "Inflation Expectations and the Stability Properties of Nominal GDP Targeting," Economic Journal, Royal Economic Society, vol. 111(468), pages 103-113, January.
- John M. Roberts, 1998. "Inflation expectations and the transmission of monetary policy," Finance and Economics Discussion Series 1998-43, Board of Governors of the Federal Reserve System (U.S.).
When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:15:y:2005:i:16:p:1165-1170. 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: (Michael McNulty)
If references are entirely missing, you can add them using this form.