Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212079 
Authors: 
Year of Publication: 
2007
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 21/2007
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We embed an expectations-based optimal policy rule into a DSGE model for a small open economy that is augmented with trend extrapolation or chartism, which is a form of technical trading, in currency trade to examine the prerequisites for monetary policy. We find that a unique REE that is least-squares learnable is often the outcome when there is a limited amount of trend extrapolation, but that a less flexible inflation rate targeting may cause a multiplicity of REE. We also compute impulse-response functions for key macroeconomic variables to study how the economy returns to steady state after being hit by a shock.
Subjects: 
determinacy
DSGE model
least-squares learning
targeting rule
technical trading
monetary policy
JEL: 
C62
E52
F31
F41
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-391-9
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.