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The Optimal Monetary Policy Response to Exchange Rate Misalignments.

Abstract:

A common feature of exchange rate misalignments is that they produce a divergence between traded and non-traded goods sectors, leading to pressures on monetary policy makers to react. In this paper we develop a small open economy model which features traded and non-traded goods sectors with which to assess the extent to which monetary policy should respond to exchange rate misalignments. To do so we initially contrast the efficient outcome of the model with that under flexible prices and find...

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Volume:
305
Series:
Discussion paper series
Publication date:
2007-01-01
URN:
uuid:4d0a7b28-1892-43b4-9713-066a48a6203d
Local pid:
ora:1344
Language:
English

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