Monetary policy, determinacy, and learnability in the open economy

James Bullard and Eric Schaling

No 611, Working Paper Series from European Central Bank

Abstract: We study how determinacy and learnability of global rational expectations equilibrium may be affected by monetary policy in a simple, two country, New Keynesian framework. The two blocks may be viewed as the U.S. and Europe, or as regions within the euro zone. We seek to understand how monetary policy choices may interact across borders to help or hinder the creation of a unique rational expectations equilibrium worldwide which can be learned by market participants. We study cases in which optimal policies are being pursued country by country as well as some forms of cooperation. We find that open economy considerations may alter conditions for determinacy and learnability relative to closed economy analyses, and that new concerns can arise in the analysis of classic topics such as the desirability of exchange rate targeting and monetary policy cooperation. JEL Classification: E52, F33

Keywords: indeterminacy; international policy coordination; monetary policy rules; new open economy macroeconomics (search for similar items in EconPapers)
Date: 2006-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp611.pdf (application/pdf)

Related works:
Working Paper: Monetary Policy, Determinacy, and Learnability in the Open Economy (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2006611

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().