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Monetary Policy, Determinacy, and Learnability in the Open Economy

  • Eric Schaling
  • James Bullard

We study how determinacy and learnability of global rational expectations equilibrium may be affected by monetary policy in a simple, two country New Keynesian framework. We seek to understand how monetary policy choices may interact across borders to help or hinder the creation of a unique REE worldwide which can be learned by market participants. We find that open economy considerations may alter conditions for determinacy and learnability relative to closed economy analyses, and that new concerns can arise in the analysis of classic topics such as the desirability of exchange rate targeting, monetary policy cooperation, and monetary union

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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2005 with number 362.

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Date of creation: 11 Nov 2005
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Handle: RePEc:sce:scecf5:362
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