International Interest Rate Shocks and Monetary Policy in a Small Open Economy
2
조회
0
다운로드
1
인용
0
참고문헌
키워드
초록
Considering that a significant part of business cycle fluctuations in small open economiescould be explained by international interest rate shocks, this paper attempts to characterizethe monetary policy rule that is optimal among simple and implementable rules for aneconomy where international interest rate shocks work as main sources of business cycles. Forthis purpose, the performances of various monetary policy rules are compared in terms ofsocial welfare based on a standard small open economy model. The main findings of thispaper are as follows. First, for a small open economy vulnerable to international interest rateshocks, domestic goods price inflation targeting is the optimal policy rule within a family ofsimple and implementable monetary policy rules. Second, it is found that exchange ratefluctuations implied by inflation targeting rule expose the monetary authority to a trade-offbetween total demand stabilization and increased volatility of inflation.
Abstract
Considering that a significant part of business cycle fluctuations in small open economiescould be explained by international interest rate shocks, this paper attempts to characterizethe monetary policy rule that is optimal among simple and implementable rules for aneconomy where international interest rate shocks work as main sources of business cycles. Forthis purpose, the performances of various monetary policy rules are compared in terms ofsocial welfare based on a standard small open economy model. The main findings of thispaper are as follows. First, for a small open economy vulnerable to international interest rateshocks, domestic goods price inflation targeting is the optimal policy rule within a family ofsimple and implementable monetary policy rules. Second, it is found that exchange ratefluctuations implied by inflation targeting rule expose the monetary authority to a trade-offbetween total demand stabilization and increased volatility of inflation.
참고문헌 (39)
- Aguiar, M., "Emerging Market Business Cycles: The Cycle is the Trend", Journal of Political Economy, 115(1), pp.69~102 (2007)
- Batini, N., "Monetary Policy Rules for an Open Economy", Journal of Economic Dynamics and Control, 27, pp.2059~2094 (2003)
- Betts, C., "Exchange Rate Dynamics in a Model of Pricing-tomarket", Journal of International Economics, 50, pp.215~244 (2000)
- Burstein, A., "Large Devaluations and the Real Exchange Rate", Journal of Political Economy, 113(4), pp.742~784 (2005)
- Burstein, A., "Modeling Exchange Rate Passthrough after Large Devaluations", Journal of Monetary Economics, 54, pp.346~368 (2007)
- International Capital Flows to Emerging and Developing Countries: National and Global Determinants, "Byrne, J. P.", University of Glasgow, ~, pp.SIRE Discussion Paper 2011-3 (2011)
- Calvo, G. A, "Staggered Prices in a Utility-maximizing Framework", Journal of Monetary Economics, 12, pp.383~398 (1983)
- Chari, V. V., "Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?", Review of Economic Studies, 69, pp.533~563 (2002)
- Corsetti, G., "International Dimensions of Optimal Monetary Policy", Journal of Monetary Economics, 52(2), pp.281~305 (2005)
- Corsetti, G., "Optimal Monetary Policy in Open Economies", Handbook of Monetary Economics, 3B, pp.861~933 (2011)
- De Giovanni, J., "The Impact of Foreign Interest Rates on the Economy: the Role of the Exchange Rate Regime", Journal of International Economics, 74, pp.341~361 (2008)
- De Paoli, B, "Monetary Policy and Welfare in a Small Open Economy", Journal of International Economics, 77, pp.11~22 (2009)
- Edward, S, "The International Transmission of Interest Rate Shocks: The Federal Reserve and Emerging Markets in Latin America an Asia", Journal of International Money and Finance, 29(4), pp.685~703 (2010)
- Faia, E., "Optimal Monetary Policy in a Small Open Economy with Home Bias", Journal of Money, 40(4), pp.721~750 (2008), Credit and Banking
- A Global Monetary Tsunami? On the Spillovers of US quantitative Easing, "Fratscher, M.", Centre for Economic Policy Research, ~, pp.CEPR Working Paper No. 9195 (2012)
- Galí, J, "Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework" (2008), Princeton University Press
- Galí, J., "Monetary Policy and Exchange Volatility in a Small Open Economy", Review of Economic Studies, 72, pp.707~734 (2005)
- García-Cicco, J., "Real Business Cycles in Emerging Countries?", American Economic Review, 100, pp.2510~2531 (2010)
- Business Cycles in Small Developed Economies: The Role of Terms of Trade and Foreign Interest Rate Shocks, "Guajardo, J", International Monetary Fund, ~, pp.IMF Working Paper WP (2008), 08[DOI]
- Recent Experience in Managing Capital Inflow-Cross-Cutting Themes and Possible Guidelines, IMF Policy Papers, "International Monetary Fund", International Monetary Fund, ~ (2011)
- Kim, J., "Spurious Welfare Reversals in International Business Cycle Models", Journal of International Economics, 60, pp.471~500 (2003)
- Kim, S, "International Transmission of U.S. Monetary Policy Shocks: Evidence from VAR’s", Journal of Monetary Economics, 48, pp.339~372 (2001)
- Kollmann, R, "Monetary Policy Rules in the Open Economy: Effects on Welfare and Business Cycles", Journal of Monetary Economic, 49(5), pp.989~1015 (2002)
- Do World Shocks Drive Domestic Business Cycles? Some Evidence from Structural Estimation, "Lubik, T. A.", Johns Hopkins University, ~ (2005)
- Maćkowiak, B, "External Shocks, U.S. Monetary Policy and Macroeconomic Fluctuations in Emerging Markets", Journal of Monetary Economics, 54, pp.2512~2520 (2007)
- Mendoza, E. G., "Devaluation Risk and the Business-Cycle Implications of Exchange Rate Management", Carnegie-Rochester Conference Series on Public Policy, 53, pp.239~296 (2000)
- Estimating the Impacts of U.S. LSAP on Emerging Market Economies’ Local Currency Bond Markets, "Moore, J.", Federal Reserve Bank of New York Staff Report, ~, pp.No. 595 (2013)
- Monacelli, T, "Monetary Policy in a Low Pass-Through Environment", Journal of Money, Credit, and Banking, 37(6), pp.1047~1066 (2005)
- Neumeyer, A., "Business Cycles in Emerging Economies: The Role of Interest Rates", Journal of Monetary Economics, 52(2), pp.345~380 (2005)
- Obstfeld, M., "New Directions for Stochastic Open Economy Models", Journal of International Economics, 50, pp.117~153 (2000)
- Schmitt-Grohé, S., "Stabilization Policy and the Costs of Dollarization", Journal of Money, Credit, and Banking, 33(2), pp.482~509 (2001)
- Schmitt-Grohé, S., "Closing Small Open Economy Models", Journal of International Economics, 61(1) (2002)
- Schmitt-Grohé, S., "Solving Dynamic General Equilibrium Models Using a Second-order Approximation to the Policy Function", Journal of Economic Dynamics and Control, 28, pp.755~775 (2004)
- Optimal Simple and Implementable Monetary and Fiscal Rules: Expanded Version, "Schmitt-Grohé, S.", National Bureau of Economic Research, ~, pp.NBER Working Paper #12402 (2006)
- Schmitt-Grohé, S., "Optimal Simple and Implementable Monetary and Fiscal Rules", Journal of Monetary Economics, 54, pp.1702~1725 (2007)
- Stockman, A. C., "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements", American Economic Review, 85(1), pp.168~185 (1995)
- Tille, C, "The Wealth Effect of International Asset Market Integration under Nominal Rigidities", Journal of International Economics, 65, pp.221~247 (2005)
- Uribe, M., "Country Spreads and Emerging Countries: Who Drives Whom?", Journal of International Economics, 69, pp.6~36 (2006)
- Woodford, M, "Interest and Prices: Foundations of a Theory of Monetary Policy" (2003), Princeton University Press