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Cited by 566

The DOI matches its Crossref record; 27 of the 27 references it cites were found in a registry or an index.

Monetary Policy and Exchange Rate Volatility in a Small Open Economy

Open access
Galí, Jordi, Monacelli, Tommaso·2004·SSRN Electronic Journal
DOI 10.2139/ssrn.859564
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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 simple representation in domestic inflation and the output gap. We use the resulting framework to analyze the macroeconomic implications of three alternative rule-based 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.

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Citations

Cites

Research works printed but not linked: 21

  1. David Backus, Consumption and Real exchange Rates in Dynamic Exchange Economies with Nontraded Goods, Journal of International Economics, 35, 297, 10.1016/0022-1996(93)90021-o · doi:10.1016/0022-1996(93)90021-o
  2. David Backus, 1995, International Business Cycles: Theory and Evidence, Frontiers of Business Cycle Research, 10.3386/w4493 · doi:10.3386/w4493
  3. Laurence Ball, 1999, Policy Rules for Open Economies, Monetary Policy Rules, 10.3386/w6760 · doi:10.3386/w6760
  4. Pierpaolo Benigno, 2004, Inflation Stabilization and Welfare: The Case of Large Distortions, 10.3386/w10838 · doi:10.3386/w10838
  5. Caroline Betts, 1996, Exchange Rate Dynamics in a Model of Pricing-to-Market, Journal of International Economics, 40, 215, 10.1016/s0022-1996(98)00036-1 · doi:10.1016/s0022-1996(98)00036-1
  6. V V Chari, 2002, Monetary Shocks and Real Exchange Rates in Sticky Price Models of International Business Cycles, Review of Economic Studies, 69, 533, 10.3386/w5876 · doi:10.3386/w5876
  7. Richard Clarida, 2001, Optimal Monetary Policy in Open vs. Closed Economies: An Integrated Approach, American Economic Review, 91, 248, 10.1257/aer.91.2.248 · doi:10.1257/aer.91.2.248
  8. Richard Clarida, 2002, A Simple Framework for International Monetary Policy Analysis, Journal of Monetary Economics, 49, 879, 10.3386/w8870 · doi:10.3386/w8870
  9. Giancarlo Corsetti, 2003, Monetary Policy in the Open Economy Revisited: Exchange Rate Flexibility and Price Setting Behavior, forthcoming Journal of Monetary Economics
  10. Michael B Devereux, 2002, Exchange Rate Pass-Through, Exchange Rate Volatility, and Exchange Rate Disconnect, Journal of Monetary Eco, 913, 10.3386/w8858 · doi:10.3386/w8858
  11. John P Judd, 1998, Taylor's Rule and the Fed: A Tale of Three Chairmen
  12. Robert G King, 1996, 10.3386/w5507 · doi:10.3386/w5507
  13. Federal Reserve Bank of St. Louis Review, 78, 10.20955/wp · doi:10.20955/wp
  14. Robert Kollmann, 2001, The Exchange Rate in a Dynamic Optimizing Current Account Model with Nominal Rigidities: A Quantitative Investigation, Journal of International Economics, 55, 243, 10.1016/s0022-1996(01)00087-3 · doi:10.1016/s0022-1996(01)00087-3
  15. Philip R Lane, 1999, The New Open Economy Macroeconomics: A Survey, Journal of International Economics, 54, 235, 10.1016/s0022-1996(00)00073-8 · doi:10.1016/s0022-1996(00)00073-8
  16. Mccallum Bennet, 2000, Monetary Policy for an Open Economy: An Alternative Framework with Optimizing Agents and Sticky Prices, Oxford Review of Economic Policy, 16, 74, 10.1093/oxrep/16.4.74 · doi:10.1093/oxrep/16.4.74
  17. Maurice Obstfeld, 1999, New Directions for Stochastic Open Economy Models, Journal of International Economics, 50, 117, 10.1016/s0022-1996(99)00034-3 · doi:10.1016/s0022-1996(99)00034-3
  18. Evi Pappa, 2002, Should the Fed and the ECB Cooperate ? Optimal Monetary Policy in a Two-Country World, Journal of Monetary Economics forthcoming. Parrado, Eric and Andr�s Velasco, 8721, 10.1016/j.jmoneco.2003.06.006 · doi:10.1016/j.jmoneco.2003.06.006
  19. Julio Rotemberg, 1999, Interest Rate Rules in an Estimated Sticky Price Model, Monetary Policy Rules, 10.3386/w6618 · doi:10.3386/w6618
  20. Argia Sbordone, 1998, Prices and Unit Labor Costs: Testing Models of Pricing Behavior
  21. Mart�n Schmitt-Groh� Stephanie, 2000, International Monetary Policy Coordination and Financial Market Integration, Journal of Economic Theory forthcoming. Sutherland Alan, 33, 482

Cited by

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Metadata

Authors
Galí, J., & Monacelli, T.
Venue
SSRN Electronic Journal
Publisher
Elsevier BV
Published
2004
ISSN
1556-5068 (ISSN-L)
DOI
10.2139/ssrn.859564
OpenAlex
W2106683726
Cited by
566
References
27
Type
posted content
Language
en
Open access
green

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