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Financial Stability in Open Economies

Ippei Fujiwara and Yuki Teranishi

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Do financial frictions call for policy cooperation? This paper investigates the implications of financial frictions for monetary policy in the open economy. Welfare analysis shows that there are long-run gains which result from cooperation, but, dynamically, financial frictions per se do not require policy cooperation to improve global welfare over business cycles. In addition, inward-looking financial stability, namely eliminating inefficient fluctuations of loan premiums in its own country, is the optimal monetary policy in the open economy, irrespective of the existence of policy coordination.

Keywords: Sacrifice Ratio; Time-Varying Parameters (search for similar items in EconPapers)
JEL-codes: E50 F41 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2013-10
New Economics Papers: this item is included in nep-dge, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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https://cama.crawford.anu.edu.au/sites/default/fil ... jiwara_teranishi.pdf (application/pdf)

Related works:
Working Paper: Financial stability in open economies (2013) Downloads
Working Paper: Financial Stability in Open Economies (2009) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2013-71

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