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- W3123711277 abstract "We lay out a small open economy version of the Calvo sticky price model, and show how the equilibrium dynamics can be reduced to a simple representation in domestic inflation and the output gap. We use the resulting framework to analyse the macroeconomic implications of three alternative rulebased policy regimes for the small open economy: domestic inflation and CPI-based Taylor rules, and an exchange rate peg. We show that a key difference among these regimes lies in the relative amount of exchange rate volatility that they entail. We also discuss a special case for which domestic inflation targeting constitutes the optimal policy, and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with the suboptimal rules." @default.
- W3123711277 created "2021-02-01" @default.
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- W3123711277 date "2002-04-01" @default.
- W3123711277 modified "2023-10-17" @default.
- W3123711277 title "Monetary Policy and Exchange Rate Volatility in a Small Open Economy" @default.
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- W3123711277 doi "https://doi.org/10.3386/w8905" @default.
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