Macroeconomic Stability: Transition Towards the Nominal Exchange Rate Stability
CERGE-EI Working Paper Series No. 368
53 Pages Posted: 7 Oct 2009
Date Written: October 1, 2008
The novelty of this work is in the presentation of a theoretical framework that allows the modeling of an announced switch of the monetary regime. In our experiment, the monetary authority announces stabilization of the nominal exchange rate after the announced number of periods. We analyze the effects of the monetary policy regime for the macroeconomic stability over the transition period. For our analysis, we consider representative forms of standard monetary regimes. Moreover, we rank the examined regimes in terms of loss functions.
Keywords: New Keynesian Models, Small Open Economy, Monetary regime switch
JEL Classification: E17, E31, E52, E58, E61, F02, F41
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