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Monetary policy rules for a small open economy

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  • W. Berger

    (LEM - Lille - Economie et Management - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper, the optimal choice of a monetary target is investigated for a small open economy that is subject to foreign monetary policy shocks. In contrast to large parts of the literature, pegging the exchange rate is never the best policy choice for the small open economy in our model. Instead, monetary targeting and, depending on the parameter combination, producer price index targeting come closest to the optimal policy rule in terms of welfare. Generally, the welfare performance of the simple targeting rules under consideration hinge critically on the degree of pass‐through in the home economy and in the rest of the world.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • W. Berger, 2008. "Monetary policy rules for a small open economy," Post-Print hal-00289681, HAL.
    • Handle: RePEc:hal:journl:hal-00289681
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    Cited by:

    1. Bianca De Paoli, 2009. "Monetary Policy under Alternative Asset Market Structures: The Case of a Small Open Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(7), pages 1301-1330, October.
    2. Bianca De Paoli, 2009. "Monetary Policy under Alternative Asset Market Structures: The Case of a Small Open Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(7), pages 1301-1330, October.

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