international policy cooperationThis chapter studies optimal monetary stabilization policy in interdependent open economies, by proposing a unified analytical framework systematizing the existing literature. In the model, the combination of complete exchange-rate pass-through ('producer currency pricing') and...
This chapter studies optimal monetary stabilization policy in interdependent open economies, by proposing a unified analytical framework systematizing the existing literature. In the model, the combination of complete exchange-rate pass-through ('producer currency pricing') and frictionless asset markets en...
We approximate the model around the optimal steady state as the long-run policy target. Optimal monetary policy is characterized by stabilization of the nominal interest rate instead of inflation stabilization as the predominant principle.doi:10.1016/j.jedc.2007.10.009Matthias Paustian...
We construct a dynamic stochastic general equilibrium model to study optimal monetary stabilization policy. Prices are fully flexible and money is essential for trade. Our main result is that if the central bank pursues a long-run price path, thereby controlling inflation expectations, it can improve...
Because wages are sticky, shocks that depress energy supply raise marginal cost even for a policy that keeps output at potential, pushing up both core and headline price inflation; thus, monetary policy faces a stabilization tradeoff. We derive a quadratic approximation to welfare following the ...
Teruyoshi Kobayashi."Optimal Monetary Policy and the Role of Hybrid Inflation-Price-Level Targets". Applied Economics . 2005Teruyoshi Kobayashi, 2005. " Optimal monetary policy and the role of hybrid inflation-price-level targets ," Applied Economics , Taylor & Francis Journals, vol. 37(18), ...
The comparison between different monetary policy regimes (floating versus pegged) shows that the impossible trinity is reversed : a higher degree of financial globalization, by inducing more persistent and volatile current account deficits, calls for exchange rate stabilization. Finally, we study the ...
However, this policy is typically suboptimal, as it leads to an excessively compressed distribution of relative prices. The optimal monetary policy balances the benefits of aggregate stabilization with the costs in terms of cross-sectional efficiency. 展开 ...
In this chapter, we derive optimal monetary policy when the central bank minimizes welfare losses arising from price dispersion among different goods. We show that welfare losses can be captured by a quadratic loss function as second order Taylor approxi
We find that coefficients of optimal Taylor rules do not significantly change if financial market stabilization becomes part of the central banks objective function. Additionally, we show that rule-based, backward-looking monetary policy creates huge instabilities if expectations are boundedly rational. ...