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Caution or activism? Monetary policy strategies in an open economy
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Ellison, Martin, Sarno, Lucio and Vilmunen, Jouko (2007) Caution or activism? Monetary policy strategies in an open economy. Macroeconomic Dynamics, Vol.11 (No.4). pp. 519-541. doi:10.1017/S136510050706021X ISSN 1365-1005.
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Official URL: http://dx.doi.org/10.1017/S136510050706021X
Abstract
We examine optimal policy in an open-economy model with uncertainty and learning, where monetary policy actions affect the economy through the real exchange rate channel. Our results show that the degree of caution or activism in optimal policy depends on whether central banks are in coordinated or uncoordinated equilibrium. If central banks coordinate their policy actions then activism is optimal. In contrast, if there is no coordination, caution prevails. In the latter case caution is optimal because it helps central banks to avoid exposing themselves to manipulative actions by other central banks.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HG Finance | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Banks and banking, Central, Monetary policy, Economics -- Mathematical models, Organizational learning, Economic policy | ||||
Journal or Publication Title: | Macroeconomic Dynamics | ||||
Publisher: | Cambridge University Press | ||||
ISSN: | 1365-1005 | ||||
Official Date: | 15 August 2007 | ||||
Dates: |
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Volume: | Vol.11 | ||||
Number: | No.4 | ||||
Page Range: | pp. 519-541 | ||||
DOI: | 10.1017/S136510050706021X | ||||
Status: | Peer Reviewed | ||||
Access rights to Published version: | Open Access (Creative Commons) | ||||
Funder: | Economic and Social Research Council (Great Britain) (ESRC) | ||||
Grant number: | RES-000-27-0126 (ESRC) |
Data sourced from Thomson Reuters' Web of Knowledge
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