GAINS FROM COMMITMENT POLICY FOR A SMALL OPEN ECONOMY: THE CASE OF NEW ZEALAND

Philip Liu ()

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

Abstract: The importance of the time-consistency problem depends critically on the model one is working with and its parameterizations. This paper attempts to quantify the magnitude of stabilization bias for a small open economy using an empirically estimated micro-founded dynamic stochastic general equilibrium model. The resultant model is used to investigate the degree to which precommitment policy can improve welfare. Rather than presenting a point estimate of the welfare gain measures, the paper maps out the entire distribution of the welfare gain using the Bayesian posterior distribution of the model’s parameters. The welfare improvement is an increasing function of the weight the central bank place on exchange rate variability. However, there is no simple relationship between the gains from precommitment and the degree of openness of the economy.

JEL-codes: C15 C51 E17 E61 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2006-12
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cama.crawford.anu.edu.au/sites/default/fil ... 1-06/25_liu_2006.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2006-25

Access Statistics for this paper

More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().