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Monetary policy in illiquid markets: Options for a small open economy

McKibbin, Renee Anne; Claus, Edda; Dungey, Mardi


Two impediments to effective monetary policy operation include illiquidity in bond markets and the zero bound of interest rates. Under these conditions alternative means of enacting monetary policy may be required. This paper empirically explores policy options implemented through equity and currency markets that will generate similar inflation responses at different time horizons. In terms of GDP loss the least costly means of achieving a particular long run inflation outcome is via the...[Show more]

CollectionsANU Research Publications
Date published: 2007-08-09
Type: Journal article
Source: Open Economies Review 19 (2008): 305–336
DOI: 10.1007/s11079-007-9059-z


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