Instrument rules in monetary policy under heterogeneity in currency trade

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dc.contributor Suomen Pankki Bask, Mikael 2014-09-22T07:58:22Z 2014-09-22T07:58:22Z 2007
dc.identifier.isbn 978-952-462-392-6
dc.identifier.isbn 978-952-462-394-0
dc.identifier.issn 1456-6184
dc.description Ilmestynyt myös Journal of economics and business 2009 ; 61 ; 2.
dc.description.abstract We embed different instrument rules into a New Keynesian model for a small open economy that is augmented with technical trading in currency trade to examine the prerequisites for monetary policy. Specifically, this paper focuses on conditions for a determinate, least-squares learnable rational expectations equilibrium (REE). Under an interest rate rule with only contemporaneous macroeconomic data, the intensity of technical trading or trend-seeking in currency trade does not affect these conditions, except in the case of an extensive use of trend-seeking. On the other hand, if the central bank uses only forward-looking information in its interest rate rule, a determinate and learnable REE is a less likely outcome when trend-seeking in currency trade becomes more popular. The interest rate rule followed by the central bank in the model incorporates interest rate smoothing. Keywords: determinacy, DSGE model, interest rate rule, least-squares learning, technical trading JEL classification numbers: C62, E52, F31, F41
dc.format.extent 27 s.
dc.language.iso eng
dc.relation.ispartofseries Bank of Finland Research Discussion Papers
dc.subject avoin talous
dc.subject rahapolitiikka
dc.subject säännöt
dc.subject korot
dc.subject valuuttakauppa
dc.subject valuuttamarkkinat
dc.subject makrotalous
dc.subject DSGE
dc.subject SP
dc.subject RP
dc.title Instrument rules in monetary policy under heterogeneity in currency trade
dc.type Sarjajulkaisu
dc.identifier.urn URN:NBN:fi:bof-20140807386
dc.subject.jel C62
dc.subject.jel E52
dc.subject.jel F31
dc.subject.jel F41 Bank of Finland Research Discussion Papers
dc.series.year 2007
dc.series.number 22/2007
dc.series.sortingnumber 0022 1.8.2007
dc.identifier.doi 10.1016/j.jeconbus.2008.05.002
dc.description.publication Published in Journal of Economics and Business, Volume 61, Issue 2, March-April 2009: 97-111

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