Arbeitspapier

Optimal monetary policy delegation under incomplete exchange rate pass-through

The central bank's optimal objective function is analyzed in a small open economy model allowing for incomplete exchange rate pass-through. The results indicate that social welfare can only be marginally improved by including an explicit exchange-rate term in the delegated objective function, irrespective of the degree of pass-through. An implicit response to the exchange rate, through Consumer Price Index (CPI) inflation targeting is, however, beneficial. Welfare can, moreover, be enhanced by appointing a central banker with a greater preference for interest rate smoothing than that of the society, as a result of surpassing some of the stabilization bias arising under a discretionary policy. Consequently, there are welfare gains from monetary policy inertia. The optimal degree of interest rate smoothing is increasing in the degree of pass-through.

Sprache
Englisch

Erschienen in
Series: SSE/EFI Working Paper Series in Economics and Finance ; No. 477

Klassifikation
Wirtschaft
Monetary Policy
Central Banks and Their Policies
Open Economy Macroeconomics
Thema
Exchange rate pass-through
inflation targeting
interest rate inertia
monetary policy
small open economy
Geldpolitik
Diskretionäre Politik
Exchange Rate Pass-Through
Offene Volkswirtschaft
Wohlfahrtseffekt
Theorie

Ereignis
Geistige Schöpfung
(wer)
Adolfson, Malin
Ereignis
Veröffentlichung
(wer)
Stockholm School of Economics, The Economic Research Institute (EFI)
(wo)
Stockholm
(wann)
2001

Handle
Letzte Aktualisierung
10.03.2025, 11:42 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

  • Adolfson, Malin
  • Stockholm School of Economics, The Economic Research Institute (EFI)

Entstanden

  • 2001

Ähnliche Objekte (12)