Optimal Monetary Policy in Open Economies with Incomplete Markets

Matthew Hoelle

Purdue University Economics Working Papers from Purdue University, Department of Economics

Abstract: In stochastic settings of large open economies, the monetary policies of central banks have real effects. This paper considers a simple N-country model with homogeneous households in each country and conventional central bank policy (open market operations). The conditions for Pareto effi ciency are characterized. Symmetric policies, or even policies in which both countries adopt some form of targeting rule, are not consistent with Pareto effi ciency (generically).

Keywords: monetary policy rules; exchange rate; infiation rate targeting; nominal GDP targeting (search for similar items in EconPapers)
JEL-codes: D50 E31 E40 E50 F41 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2014-10
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pur:prukra:1279

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