Monetary Policy Rules and the Exchange Rate

61 Pages Posted: 30 Jul 2000

See all articles by Gianluca Benigno

Gianluca Benigno

Federal Reserve Bank of New York; London School of Economics & Political Science (LSE) - Department of Economics

Pierpaolo Benigno

University of Bern - Department of Economics

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Abstract

A positive and normative evaluation of alternative monetary policy regimes is addressed in a simple two-country general equilibrium model. The behavior of the exchange rate, as well as of the other macroeconomic variables, depends crucially on the monetary regime chosen, though not necessarily on monetary shocks. The centralized welfare criterion presents a trade-off between stabilizing the economy around the flexible-price allocation and reducing the volatility of the nominal interest rates. Some form of control of the exchange rate is desirable.

JEL Classification: E50, E58, F41, F42

Suggested Citation

Benigno, Gianluca and Benigno, Gianluca and Benigno, Pierpaolo, Monetary Policy Rules and the Exchange Rate. Available at SSRN: https://ssrn.com/abstract=231171 or http://dx.doi.org/10.2139/ssrn.231171

Gianluca Benigno (Contact Author)

Federal Reserve Bank of New York ( email )

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London School of Economics & Political Science (LSE) - Department of Economics

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Pierpaolo Benigno

University of Bern - Department of Economics ( email )

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