Monetary Policy and Exchange Rate Volatility in a Small Open Economy
- Topics:
- Inflation
- Tags:
- Currency & Foreign Exchange,
- Finance,
- Inflation,
- National Bureau Of Economic Research,
- Volatility
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Overview: This report lays out a small open economy version of the Calvo sticky price model, and shows how the equilibrium dynamics can be reduced to a tractable canonical system in domestic inflation and the output gap. It employs this framework to analyze the macroeconomic implications of three alternative monetary policy regimes for the small open economy: domestic inflation targeting, CPI targeting and an exchange rate peg.
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Format: PDF | Size: 742KB | Date: Apr 2002 | Pages: 45
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