Gaps and Triangles

Adão, Bernardino; Correia, Isabel; Teles, Pedro

doi:10.2139/ssrn.294939

Cited by 21 publications

(34 citation statements)

References 13 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Hence, in a closed economy, and under isoelastic preferences, a constant‐markup policy always coincides with a constrained optimum. This result is consistent with the one in Adao, Correia, and Teles (2003), as well as with a broad class of contributions in the New Keynesian optimal monetary policy literature (see Clarida, Galí, and Gertler 1999, Khan, King, and Wolman 2003, Woodford 2003). The intuition is well understood.…”

supporting

confidence: 90%

“…We continue to assume isoelastic preferences. This is the assumption under which Adao, Correia, and Teles (2003)—in the context of a closed economy with pre‐set prices—show that the constant‐markup allocation is consistent with the constrained optimum 11…”

Section: Optimal Monetary Policymentioning

confidence: 92%

“…Optimal policy is determined by a monetary authority that, under commitment, maximizes the discounted sum of utility of the representative agent under the constraints that characterize the competitive economy. As in the classical literature on optimal taxation (Chari, Christiano, and Kehoe 1991) or more recently in the monetary policy closed‐economy analysis of Adao, Correia, and Teles (2003) and Khan, King, and Wolman (2003), the policy problem takes the form of an allocation problem , in which the government can be thought of choosing directly a feasible allocation subject to those constraints that summarize the competitive equilibrium.…”

Section: Optimal Monetary Policymentioning

confidence: 99%

“…Recently there has been a resurgence of interest for a Ramsey‐type approach in dynamic general equilibrium models with monopolistic competition and nominal rigidities. Examples include, in the context of closed‐economy models, Adao, Correia, and Teles (2003), Khan, King, and Wolman (2003), Schmitt‐Grohe and Uribe (2004), and Siu (2004) 2 . However, most of the welfare analysis of monetary policy in the recent literature builds on a linear‐quadratic approximation approach in the spirit of Rotemberg and Woodford (1997), Woodford (2003), and Benigno and Woodford (2005).…”

mentioning

confidence: 99%

See 3 more Smart Citations

Optimal Monetary Policy in a Small Open Economy with Home Bias

Faia

Monacelli

2008

J of Money Credit Banking

130

View full text Add to dashboard Cite

We analyze optimal monetary policy in a small open economy characterized by home bias in consumption. Peculiar to our framework is the application of a Ramsey-type analysis to a model of the recent open-economy New Keynesian literature. We show that home bias in consumption is a sufficient condition for inducing the monetary policymaker of an open economy to deviate from a strategy of strict markup stabilization and contemplate some (optimal) degree of exchange rate stabilization. We focus on the optimal setting of policy both in the case of firms setting prices one period in advance and in a gradual fashion subject to adjustment costs. While the first setup allows us to analytically highlight home bias as an independent source of equilibrium markup variability, the second setup allows to study the effects of future expectations on the optimal policy problem and the effect of home bias on optimal inflation volatility. The latter, in particular, is shown to be related to the degree of trade openness in a U-shaped fashion, whereas exchange rate volatility is monotonically decreasing in openness. Copyright (c) 2008 The Ohio State University.

show abstract

supporting

confidence: 90%

Section: Optimal Monetary Policymentioning

confidence: 92%

Section: Optimal Monetary Policymentioning

confidence: 99%

mentioning

confidence: 99%

See 2 more Smart Citations

Optimal Monetary Policy in a Small Open Economy with Home Bias

Faia

Monacelli

2008

J of Money Credit Banking

130

View full text Add to dashboard Cite

show abstract

“…Note, however, that in this model, a zero interest rate equilibrium is (constrained) optimal. A related fact that when the nominal interest rate is zero the money supply is indeterminate is discussed by Carlstrom and Fuerst (1998) and Adão, Correia and Teles (2001).…”

mentioning

confidence: 99%

Money and Prices Under Uncertainty

Nakajima

Polemarchakis

2005

The Review of Economic Studies

View full text Add to dashboard Cite

Monetary policy does not suffice to determine the stochastic path of inflation. A "nominal equivalent martingale measure", associated with nominal asset prices, and the initial price level characterize the indeterminacy of monetary equilibria under uncertainty; when prices are flexible, the "nominal equivalent martingale measure" determines the distribution of rates of inflation up to the first moment. Monetary policy sets interest rates or money supplies; fiscal policy is Ricardian or non-Ricardian; asset markets are complete or incomplete;in commodity markets, competition may be imperfect and prices sticky; the asset market opens before or after the commodity market at each date-event. Recursive equilibria under interest rate policy are, also, indeterminate. Indeterminacy, here, does not derive from the stability of a deterministic steady state. Determinacy of the real allocation requires that the asset market be complete, monetary policy set interest rates, prices be flexible and the exchange of assets precede the exchange of commodities.

show abstract

Optimal central bank lending

Schabert

2015

Journal of Economic Theory

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe analyze optimal monetary policy in a sticky price model where the central bank supplies money outright via asset purchases and lends money temporarily against collateral. The terms of central bank lending a¤ect rationing of money and impact on macroeconomic aggregates. The central bank can set the policy rate and its in ‡ation target in a way that implements the …rst best long-run allocation, which is impossible if money were supplied in a lump-sum way (as commonly assumed). E¢ cient central bank lending further increases gains from macroeconomic stabilization beyond pure interest rate policy. This requires departing from a "Treasuriesonly" regime.JEL classi…cation: E4; E5; E32.

show abstract

Gaps and Triangles

Cited by 21 publications

References 13 publications

Optimal Monetary Policy in a Small Open Economy with Home Bias

Optimal Monetary Policy in a Small Open Economy with Home Bias

Money and Prices Under Uncertainty

Optimal central bank lending

Contact Info

Product

Resources

About