Exchange rates, monetary policy regimes, and beliefs

Keith Sill () and Jeffrey M. Wrase

No 99-6, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: The authors investigate an international monetary business-cycle model in which agents face monetary policy processes that incorporate regime shifts. In any given period agents cannot directly observe the policy regime, but instead form beliefs that are updated via Bayesian learning. As a result, expectation adjustment displays inertia that adds persistence to the effects of monetary shocks. Monetary policy process for the U.S. and an aggregate of OECD countries are estimated using Hamilton's Markov-switching model. The authors then solve and calibrate a version of the model and examine its quantitative properties.

Keywords: Foreign exchange rates; Monetary policy (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-pke
Date: 1999
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Related works:
Working Paper: Exchange Rates, Monetary Policy Regimes, and Beliefs (2000)
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