Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211971 
Year of Publication: 
2004
Series/Report no.: 
Bank of Finland Discussion Papers No. 3/2004
Publisher: 
Bank of Finland, Helsinki
Abstract: 
In this paper, we examine the incentives for central bank activism and caution in a two-country open-economy model with uncertainty and learning.We find that the presence of a strategic interaction between the home and foreign central banks creates an additional motivation for caution in monetary policy.An activist policy designed to help the learning of the home central bank is suboptimal since it generates a strong reaction from the foreign central bank.As joint learning by the home and foreign central banks is shown to be detrimental to welfare, the optimal policy is cautious.
Subjects: 
activism
learning
monetary policy
open economy
JEL: 
D81
D83
E52
E58
F41
Persistent Identifier of the first edition: 
ISBN: 
952-462-118-5
Document Type: 
Working Paper

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