Monetary Policy and Exchange Rate Volatility in a Small Open Economy

Nonfiction, Social & Cultural Studies, Political Science, Politics, Economic Policy
Cover of the book Monetary Policy and Exchange Rate Volatility in a Small Open Economy by Jonas Böhmer, GRIN Publishing
View on Amazon View on AbeBooks View on Kobo View on B.Depository View on eBay View on Walmart
Author: Jonas Böhmer ISBN: 9783640438594
Publisher: GRIN Publishing Publication: October 2, 2009
Imprint: GRIN Publishing Language: English
Author: Jonas Böhmer
ISBN: 9783640438594
Publisher: GRIN Publishing
Publication: October 2, 2009
Imprint: GRIN Publishing
Language: English

Seminar paper from the year 2008 in the subject Business economics - Economic Policy, grade: 1,3, University of Bonn (Wirtschaftspolitische Abteilung der Rechts- und Staatswissenschaftlichen Fakultät), course: Geldtheorie- und politik, language: English, abstract: Does inflation reduce welfare? What is worse, a volatile exchange rate or a high inflation rate? And is the central bank able to drive these variables? These questions are the topic of a paper by Jordi Gali and Tommaso Monacelli, published in 2005 and titled 'Monetary Policy and Exchange Rate Volatility in a Small Open Economy'. As apparent by the title Gali and Monacelli (G+M) analyze the influence of monetary policy on the volatility of the exchange rate, more precisely the nominal exchange rate and the terms of trade. For this purpose they create a small open economy with sticky prices of Calvo-type. Due to its minor size this economy does not influence the world economy. However, depending on the degree of openness this economy is affected by the rest of the world. Having specified this framework, G+M introduce three different monetary regimes and evaluate the resulting exchange rate volatilities . Using a central bank loss function G+M rank these three rules according to the implied welfare which shows a positive correlation between welfare and exchange rate volatility. Thence G+M prefer Taylor rules over an exchange rate pegging. To get a general idea of Gali and Monacelli`s argumentation this expose will start in chapter 2 with an abbreviated overlook over G+M's model of a small open economy. In the following chapter there will be the introduction of the three central bank rules, necessary to close the model, as well as an analysis of the underlying welfare levels. Since the welfare evaluation is based on some special assumptions, chapter 4 will give an overview of recent literature which discusses possible extensions as well as their implications for G+M's ranking of implied welfare. Concluding chapter 5 will summarize G+M's most important results as well as evaluate if the possible extensions render G+M's analysis, respectively their results, worthless.

View on Amazon View on AbeBooks View on Kobo View on B.Depository View on eBay View on Walmart

Seminar paper from the year 2008 in the subject Business economics - Economic Policy, grade: 1,3, University of Bonn (Wirtschaftspolitische Abteilung der Rechts- und Staatswissenschaftlichen Fakultät), course: Geldtheorie- und politik, language: English, abstract: Does inflation reduce welfare? What is worse, a volatile exchange rate or a high inflation rate? And is the central bank able to drive these variables? These questions are the topic of a paper by Jordi Gali and Tommaso Monacelli, published in 2005 and titled 'Monetary Policy and Exchange Rate Volatility in a Small Open Economy'. As apparent by the title Gali and Monacelli (G+M) analyze the influence of monetary policy on the volatility of the exchange rate, more precisely the nominal exchange rate and the terms of trade. For this purpose they create a small open economy with sticky prices of Calvo-type. Due to its minor size this economy does not influence the world economy. However, depending on the degree of openness this economy is affected by the rest of the world. Having specified this framework, G+M introduce three different monetary regimes and evaluate the resulting exchange rate volatilities . Using a central bank loss function G+M rank these three rules according to the implied welfare which shows a positive correlation between welfare and exchange rate volatility. Thence G+M prefer Taylor rules over an exchange rate pegging. To get a general idea of Gali and Monacelli`s argumentation this expose will start in chapter 2 with an abbreviated overlook over G+M's model of a small open economy. In the following chapter there will be the introduction of the three central bank rules, necessary to close the model, as well as an analysis of the underlying welfare levels. Since the welfare evaluation is based on some special assumptions, chapter 4 will give an overview of recent literature which discusses possible extensions as well as their implications for G+M's ranking of implied welfare. Concluding chapter 5 will summarize G+M's most important results as well as evaluate if the possible extensions render G+M's analysis, respectively their results, worthless.

More books from GRIN Publishing

Cover of the book Bilanzielle Behandlung von ABS-Transaktionen nach IFRS by Jonas Böhmer
Cover of the book The illusion of objectivity, the question of ethics, or give the right support by Jonas Böhmer
Cover of the book Cabaret Songs by Jonas Böhmer
Cover of the book Political experiments in Eastern Europe: Civil society by Jonas Böhmer
Cover of the book Ironie -Theorie und Praxis by Jonas Böhmer
Cover of the book The U.S.' and Israel's Securitization of Iran's Nuclear Energy by Jonas Böhmer
Cover of the book Expression of War in 'Strange Meeting', 'Anthem for a Doomed Youth', 'Futility' and 'Mental Cases' by Wilfred Owen by Jonas Böhmer
Cover of the book William Trevor: After Rain by Jonas Böhmer
Cover of the book Customer Equity Analyses by Jonas Böhmer
Cover of the book Smithkline Consumer Products. The Contac® Relaunch by Jonas Böhmer
Cover of the book Methods of social enquiry - Financing university residences by Jonas Böhmer
Cover of the book Mass media's influence on everyday speech amongst adolescents: Research findings and perspectives by Jonas Böhmer
Cover of the book How and why have the EU's external policies changed toward developing countries ? by Jonas Böhmer
Cover of the book Different Readings of Sir Thomas More's Utopia - from an Ideal state to the First Dystopia by Jonas Böhmer
Cover of the book Voice-over narration in Desperate Housewives by Jonas Böhmer
We use our own "cookies" and third party cookies to improve services and to see statistical information. By using this website, you agree to our Privacy Policy