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Optimal monetary policy in open economies revisited

Fujiwara, Ippei; Wang, Jiao

Description

This paper revisits optimal monetary policy in open economies, in particular, focusing on the noncooperative policy game under local currency pricing in a two-country dynamic stochastic general equilibrium model. We first derive the quadratic loss functions which noncooperative policy makers aim to minimize. Then, we show that noncooperative policy makers face extra trade-offs regarding stabilizing real marginal costs induced by deviations from the law of one price under local currency...[Show more]

CollectionsANU Research Publications
Date published: 2017
Type: Journal article
URI: http://hdl.handle.net/1885/122893
Source: Journal of International Economics
DOI: 10.1016/j.jinteco.2017.07.006
Access Rights: Open Access

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