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Monetary policy under alternative asset market structures: the case of a small open economy

De Paoli, Bianca (2009) Monetary policy under alternative asset market structures: the case of a small open economy. CEP Discussion Paper, No. 923. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Identification Number: No. 923

Abstract

Can the structure of asset markets change the way monetary policy should be conducted? Following a linear-quadratic approach, the present paper addresses this question in a New Keynesian small open economy framework. Our results reveal that the configuration of asset markets significantly affects optimal monetary policy and the performance of standard policy rules. In particular, when comparing complete and incomplete markets, the ranking of policy rules is entirely reversed, and so are the policy prescriptions regarding the optimal level of exchange rate volatility.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2009 The authors
Subjects: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Series: Working Papers > CEP Discussion Papers
Date Deposited: 13 Jul 2010 11:33
Last Modified: 14 Nov 2012 10:19
URI: http://eprints.lse.ac.uk/id/eprint/28595

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