Arbeitspapier

Simple Rules of the Monetary Policy and Incomplete Exchange Rate Pass-Through

The performance of various monetary rules is investigated in an open economy with incomplete exchange rate pass-through. Implementing monetary policy through an exchange-rate augmented policy rule does not improve social welfare compared to using an optimized Taylor rule, irrespective of the degree of pass-through. However, an indirect exchange rate response, through a policy reaction to Consumer Price Index (CPI) inflation rather than to domestic inflation, welfare-enhancing in all pass-through cases. This result is moreover independent of whether society values domestic or CPI inflation stabilization. The only case where a direct real exchange rate response is slightly welfare improving occurs when the other reaction coefficients, on inflation and output, are sub-optimal.

Sprache
Englisch

Klassifikation
Wirtschaft
Thema
Exchange rate pass-through
monetary policy
simple policy rules
small open economy
Taylor rule

Ereignis
Geistige Schöpfung
(wer)
Alali, Walid Y.
Ereignis
Veröffentlichung
(wer)
ZBW - Leibniz Information Centre for Economics
(wo)
Kiel, Hamburg
(wann)
2012

Handle
Letzte Aktualisierung
10.03.2025, 11:41 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Alali, Walid Y.
  • ZBW - Leibniz Information Centre for Economics

Entstanden

  • 2012

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