The Effects of Anticipated Future Change in the Monetary Policy Regime

61 Pages Posted: 7 Jun 2011

See all articles by František Brázdik

František Brázdik

Czech National Bank; Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences

Juraj Antal

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences

Date Written: December 7, 2007

Abstract

In this paper, we investigate the effects of an anticipated future change in monetary policy regime in small open economies targeting either inflation or the exchange rate. The announcement of a future change in the monetary policy regime triggers an immediate change in the behavior of households and firms. As a result the economy starts to behave differently even though the current monetary policy rule remains the same for the whole period before the monetary policy regime change. Thus, the behavior of economic agents over the transitory period to the new monetary policy rule depends not only on the current monetary policy rule in this transitory period, but also on the anticipated future monetary policy regime. Given a common future monetary policy regime, the behavior of inflation and exchange rate targeting economies converges after the announcement.

Keywords: macroeconomics, new Keynesian DSGE models, small open economy

JEL Classification: E17, E31, E52, E58, E61, F02, F41

Suggested Citation

Brázdik, František and Antal, Juraj, The Effects of Anticipated Future Change in the Monetary Policy Regime (December 7, 2007). Available at SSRN: https://ssrn.com/abstract=1859328 or http://dx.doi.org/10.2139/ssrn.1859328

František Brázdik (Contact Author)

Czech National Bank ( email )

Na Prikope 28
CZ-11503 Praha 1
Czech Republic

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

Juraj Antal

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
75
Abstract Views
806
Rank
571,914
PlumX Metrics