UID:
edocfu_9958108002402883
Format:
1 online resource (28 p.)
Edition:
1st ed.
ISBN:
1-4623-5888-8
,
1-4527-9252-6
,
1-283-51585-7
,
1-4519-8500-2
,
9786613828309
Series Statement:
IMF working paper ; WP/06/164
Content:
This paper studies the optimal design of monetary policy in an optimizing two-country sticky price model. We suppose that the production sequence of final consumption goods stretches across both countries and is associated with vertical trade. Prices of final consumption goods are sticky in the consumer's currency. Pursuing an inward-looking policy, as suggested in recent work, is not optimal in this set-up. We also ask which simple, i.e. non-optimal, targeting rule best supports the welfare maximizing policy. The results hinge critically on the degree of price flexibility and the relative importance of cost-push and productivity shocks. In many cases, a strict targeting of price indices like producer or consumer price indices is dominated by rules that allow for some fluctuations in prices such as nominal income or monetary targeting.
Note:
"June 2006."
,
""Contents""; ""I. INTRODUCTION""; ""II. THE MODEL""; ""III. WELFARE, OUTPUT AND CONSUMPTION ""; ""IV. OPTIMAL MONETARY POLICY AND POLICY COORDINATION ""; ""V. SIMPLE RULES AND WELFARE""; ""VI. CONCLUSIONS""; ""REFERENCES""
,
English
Additional Edition:
ISBN 1-4518-6424-8
Language:
English
