Monetary Policy Rules and the Exchange Rate

63 Pages Posted: 30 May 2001

See all articles by Gianluca Benigno

Gianluca Benigno

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

Pierpaolo Benigno

Luiss Guido Carli University; Einaudi Institute for Economics and Finance (EIEF)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2001

Abstract

A positive and normative evaluation of alternative monetary policy regimes is addressed in a two-country general equilibrium model. The behaviour 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. In this framework, some form of control of the exchange rate is welfare improving.

Keywords: Monetary policy rules, exchange rate regimes, welfare criterion

JEL Classification: E52, F41

Suggested Citation

Benigno, Gianluca and Benigno, Pierpaolo, Monetary Policy Rules and the Exchange Rate (May 2001). CEPR Discussion Paper No. 2807, Available at SSRN: https://ssrn.com/abstract=271697

Gianluca Benigno (Contact Author)

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

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7807 (Phone)

Pierpaolo Benigno

Luiss Guido Carli University

Viale Romania 32
Rome, Roma 00197
Italy

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
25
Abstract Views
1,427
PlumX Metrics