Exchange Rates, Monetary Policy Regimes, and Beliefs

Federal Reserve Bank of Philadelphia Working Paper No. 99-6

40 Pages Posted: 4 Aug 1999

See all articles by Keith Sill

Keith Sill

affiliation not provided to SSRN

Jeff Wrase

affiliation not provided to SSRN

Date Written: June 17, 1999

Abstract

The authors investigate an international monetary business-cycle model in which agents face monetary policy processes that incorporate regime shifts. In any given period agents cannot directly observe the policy regime, but instead form beliefs that are updated via Bayesian learning. As a result, expectation adjustment displays inertia that adds persistence to the effects of monetary shocks. Monetary policy process for the U.S. and an aggregate of OECD countries are estimated using Hamilton's Markov-switching model. The authors then solve and calibrate a version of the model and examine its quantitative properties.

JEL Classification: E32, F31, F41

Suggested Citation

Sill, Keith and Wrase, Jeff, Exchange Rates, Monetary Policy Regimes, and Beliefs (June 17, 1999). Federal Reserve Bank of Philadelphia Working Paper No. 99-6, Available at SSRN: https://ssrn.com/abstract=170552 or http://dx.doi.org/10.2139/ssrn.170552

Keith Sill (Contact Author)

affiliation not provided to SSRN

Jeff Wrase

affiliation not provided to SSRN

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