Link to the University of Pittsburgh
Link to the University Library SystemContact us link
AEI Banner

Openness, imperfect exchange rate pass-through and monetary policy. NBB Working Paper Nr. 19

Smets, Frank and Wouters, Raf (2002) Openness, imperfect exchange rate pass-through and monetary policy. NBB Working Paper Nr. 19. [Working Paper]

[img]
Preview
PDF
Download (318Kb) | Preview

    Abstract

    This paper analyses the implications of imperfect exchange rate passthrough for optimal monetary policy in a linearised open-economy dynamic general equilibrium model calibrated to euro area data. Imperfect exchange rate pass through is modelled by assuming sticky import price behaviour. The degree of domestic and import price stickiness is estimated by reproducing the empirical identified impulse response of a monetary policy and exchange rate shock conditional on the response of output, net trade and the exchange rate. It is shown that a central bank that wants to minimise the resource costs of staggered price setting will aim at minimising a weighted average of domestic and import price inflation.

    Export/Citation:EndNote | BibTeX | Dublin Core | ASCII (Chicago style) | HTML Citation | OpenURL
    Social Networking:
    Item Type: Working Paper
    Uncontrolled Keywords: Open economies; imperfect exchange rate pass-through.
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > monetary policy
    EU policies and themes > Policies & related activities > economic and financial affairs > EMU/EMS/euro
    Subjects for EU documents: UNSPECIFIED
    EU Series: UNSPECIFIED
    ["eprint_fieldname_eusries" not defined]: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > National Bank of Belgium (Brussels) > Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 25 Jun 2003
    Page Range: p. 57
    Last Modified: 15 Feb 2011 17:16
    URI: http://aei.pitt.edu/id/eprint/658

    Actions (login required)

    View Item

    Document Downloads