Optimal Exchange Rate Stabilization in a Dollarized Economy with Inflation Targets

Nicoletta Batini, Joseph Pearlman and Paul Levine (p.levine@surrey.ac.uk)

No 148, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: We build a small open-economy model with partial financial dollarization--households hold wealth in domestic currency and a foreign currency; firms also have a balance sheet mismatch as in Gertler, Gilchrist and Natalucci (2001). The degree of dollarization is endogenous to the extent of exchange rate stabilization by the central bank. We identify the optimal monetary policy response and assess the optimal degree of exchange rate stabilization in this set up, drawing policy implications for countries that target inflation in economies of this kind

Keywords: dollarization; exchange rate; monetary policy (search for similar items in EconPapers)
JEL-codes: E3 E5 (search for similar items in EconPapers)
Date: 2006-07-04
References: Add references at CitEc
Citations: View citations in EconPapers (10)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Optimal Exchange Rate Stabilization in a Dollarized Economy with Inflation Targets (2008)
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:sce:scecfa:148

Access Statistics for this paper

More papers in Computing in Economics and Finance 2006 from Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum (baum@bc.edu).