Monetary policy under alterative asset market structures: the case of a small open economy

Bianca De Paoli ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Can the structure of asset markets change the way monetary policy should be conducted? Following a linear-quadratic approach, the present paper addresses this question in a New Keynesian small open economy framework. Our results reveal that the configuration of asset markets significantly affects optimal monetary policy and the performance of standard policy rules. In particular, when comparing complete and incomplete markets, the ranking of policy rules is entirely reversed, and so are the policy prescriptions regarding the optimal level of exchange rate volatility.

JEL-codes: E52 E61 F41 G15 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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http://eprints.lse.ac.uk/51586/ Open access version. (application/pdf)

Related works:
Journal Article: Monetary Policy under Alternative Asset Market Structures: The Case of a Small Open Economy (2009)
Working Paper: Monetary Policy Under Alterative Asset Market Structures: the Case of a Small Open Economy (2009)
Working Paper: Monetary policy under alternative asset market structures: the case of a small open economy (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:51586

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