Optimal Monetary Policy in a Small Open Economy with Habit Formation and Nominal Rigidities

Optimal Monetary Policy in a Small Open Economy with Habit Formation and Nominal Rigidities
Introducing habit formation into an open economy macroeconomic model with price stickiness, we examine the characteristics of an optimal monetary policy. We find that, first, the optimal policy rule entails interest rate smoothing and responds to the lagged values of the foreign interest rate and domestic technology shocks as well as their... READ MORE...

Publication date: January 2003
ISBN 9781451842203
$15.00

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