文章基本信息

标题：Monetary Policy and Welfare in a Small Open Economy
本地全文：下载
作者：Bianca De Paoli
期刊名称：CEP Discussion Paper
出版年度：2004
卷号：2004
期号：may
出版社：Centre for Economic Performance
摘要：This paper characterizes welfare in a small open economy and derives the corresponding optimal monetary policy rule. It shows that the utility-based loss function for a small open economy is a quadratic expression in domestic inflation, output gap and real exchange rate. In contrast to previous works, this paper demonstrates that welfare in a small open economy, completely integrated with the rest of the world, is affected by exchange rate variability. Consequently, the optimal policy in a small open economy is not isomorphic to a closed economy and does not prescribe a pure floating exchange rate regime. Domestic inflation targeting is optimal only under a particular parameterization, where the unique relevant distortion in the economy is price stickiness. Under a general specification for preferences and in the presence of inefficient steady state output, exchange rate targeting arises as part of the optimal monetary plan.
关键词：Welfare, Optimal Monetary Policy, Small Open Economy