Policy Responses to Exchange-Rate Movements / Laurence M. Ball.

Format:

Book

Author/Creator:

Ball, Laurence M.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15173.

NBER working paper series no. w15173

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

This paper examines policy responses to exchange-rate movements in a simple model of an open economy. The optimal response of monetary policy to an exchange-rate change depends on the source of the change: on whether the underlying shock is a shift in capital flows, manufactured exports, or commodity prices. The paper compares the model's prescriptions to the policies of an actual central bank, the Bank of Canada. Finally, the paper considers the role of fiscal policy in an open economy. Coordinated fiscal and monetary responses to exchange-rate movements stabilize output at the sectoral as well as aggregate level.

Notes:

Print version record

July 2009.