Monetary Policy in an Estimated Open-Economy Model with Imperfect Pass-Through

Jesper Lindé, Marianne Nessen and Ulf Söderström ()

No 4531, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a structural model of a small open economy with gradual exchange rate pass-through and endogenous inertia in inflation and output. We then estimate the model by matching the implied impulse responses with those obtained from a VAR model estimated on Swedish data. Although our model is highly stylized it captures very well the responses of output, domestic and imported inflation, the interest rate, and the real exchange rate. In order to account for the observed persistence in the real exchange rate and the large deviations from UIP, however, we need a large and volatile premium on foreign exchange.

Keywords: calibration; estimation; new open-economy macroeconomics; structural open-economy model (search for similar items in EconPapers)
JEL-codes: E52 F31 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-mon
Date: 2004-08
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Related works:
Working Paper: Monetary Policy in an Estimated Open-Economy Model with Imperfect Pass-Through (2004)
Working Paper: Monetary Policy in an Estimated Open-Economy Model with Imperfect Pass-Through (2004)
Journal Article: Monetary policy in an estimated open-economy model with imperfect pass-through (2009)
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