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Gains from interest-rate smoothing in a small open economy with zero-bound aversion

Kam, Timothy


We extend the Monacelli [Monacelli, T. (2005). Monetary policy in a low pass-through environment. Journal of Money, Credit and Banking, 37(6), 1047-1066] model to allow for a central bank that penalizes nominal interest rate paths that are too close to the zero lower bound. We analytically derive the optimal interest-rate policy rule in each equilibrium under four policy regimes: (i) benchmark commitment to an ex-ante optimal monetary-policy plan; (ii) benchmark discretionary policy; (iii)...[Show more]

CollectionsANU Research Publications
Date published: 2009
Type: Journal article
Source: North American Journal of Economics and Finance
DOI: 10.1016/j.najef.2009.01.001


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