A measure of monetary conditions
This paper explains why the overall stance of monetary policy is effected by both interest rates and the exchange rate, and hence why a Monetary Conditions Indicator can provide useful information about the stance of policy. Three output gap equations estimated in this paper reveal that the real interest rate and the real exchange rate both affect excess demand but that the real interest rate is the more powerful and faster acting policy transmission channel.
|Date of creation:||Jan 1997|
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568, Board of Governors of the Federal Reserve System (U.S.).
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