Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82013
Authors: 
Dam, Niels Arne
Gregers Linaa, Jesper
Year of Publication: 
2005
Series/Report no.: 
EPRU Working Paper Series 2005-04
Abstract: 
This paper performs a welfare analysis based on the hypothetical scenario that Denmark gave up its peg and started conducting monetary policy according to a Taylor rule. For this we rely on a dynamic stochastic general equilibrium model for a small open economy that was estimated on Danish data using Bayesian methods. We obtain the result that the gain in welfare is equivalent to a permanent increase of around 0.8 pct in the level of consumption. Examining a range of alternative scenarios does not change this conclusion, unless we assume a degree of policy errors under the Taylor rule that is substantially larger than those estimated by other studies.
Subjects: 
open economy
monetary policy
business cycles
welfare
JEL: 
E3
E4
E5
F4
Document Type: 
Working Paper

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