Monetary policy, determinacy, and learnability in a two-block world economy

James Bullard () and Eric Schaling ()

No 2006-038, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We study how determinacy and learnability of worldwide rational expectations equilibrium may be affected by monetary policy in a simple, two country, New Keynesian framework under both fixed and flexible exchange rates. We find that open economy considerations may alter conditions for determinacy and learnability relative to closed economy analyses, and that new concerns can arise in the analysis of classic topics such as the desirability of exchange rate targeting and monetary policy cooperation.

Keywords: Monetary policy; Foreign exchange (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac and nep-mon
Date: 2006
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