|This centre is a member of The LSE Research Laboratory [RLAB]: CASE | CVER | CEP | SERC | STICERD||Cookies?|
Paper No' CEPDP0923: | Full paper
Save Reference as: BibTeX File | EndNote Import File
Keywords: Welfare; Optimal Monetary Policy, Asset Markets, Small Open Economy
JEL Classification: F41; G15; E52;E61
Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CEP Discussion Papers
Share this page: Google Bookmarks | Facebook | Twitter
Abstract:Can the structure of asset markets change the way monetary policy should be conducted? Following a linear-quadratic approach, the present paper addresses this question in a New Keynesian small open economy framework. Our results reveal that the configuration of asset markets significantly affects optimal monetary policy and the performance of standard policy rules. In particular, when comparing complete and incomplete markets, the ranking of policy rules is entirely reversed, and so are the policy prescriptions regarding the optimal level of exchange rate volatility.
Copyright © RLAB & LSE 2003 - 2018 | LSE, Houghton Street, London WC2A 2AE | Contact: RLAB | Site updated 17 March 2018