Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82453
Authors: 
Leitemo, Kai
Söderström, Ulf
Year of Publication: 
2001
Series/Report no.: 
Sveriges Riksbank Working Paper Series 122
Abstract: 
We analyze the performance and robustness of some common simple rules for monetary policy in a New-Keynesian open economy model under different assumptions about the exchange rate model. Adding the exchange rate to an optimized Taylor rule gives only small improvements in terms of economic stability in most model configurations. The Taylor rule is also slightly more robust to uncertainty about the exchange rate model than are rules that respond to the rate of exchange rate depreciation. Our results thus indicate that the Taylor rule may be sufficient to stabilize a small open economy, also under exchange rate model uncertainty.
Subjects: 
Open economy
Exchange rate determination
Model uncertainty
Robustness of policy rules
JEL: 
E52
E58
F41
Document Type: 
Working Paper

Files in This Item:
File
Size
439.76 kB





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