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Short-Run Independence of Monetary Policy under Pegged Exchange Rates and Effects of Money on Exchange Rates and Interest Rates
This paper examines the effects of money supply changes on exchange rates, interest rates, and production in an optimizing two-country model in which some sectors of the economy have predetermined nominal prices in the short run and other sectors have flexible prices. Money supply shocks have liquid...
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| Published in: | Journal of money, credit and banking credit and banking, 1997-11, Vol.29 (4), p.783-806 |
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| Main Authors: | , |
| Format: | Article |
| Language: | English |
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| cited_by | cdi_FETCH-LOGICAL-c584t-2654113f8c7bb30654eb35aaa0d89dde232e627de78972ea7f671f26cb748a313 |
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| container_end_page | 806 |
| container_issue | 4 |
| container_start_page | 783 |
| container_title | Journal of money, credit and banking |
| container_volume | 29 |
| creator | Ohanian, Lee E. Stockman, Alan C. |
| description | This paper examines the effects of money supply changes on exchange rates, interest rates, and production in an optimizing two-country model in which some sectors of the economy have predetermined nominal prices in the short run and other sectors have flexible prices. Money supply shocks have liquidity effects both within and across countries and induce a cross-country real interest differential. The model predicts that liquidity effects are highly nonlinear and are not likely to be captured well empirically by linear models, particularly those involving only a single country. A striking implication of the model is that countries have a significant degree of short-run independence of monetary policy even under pegged exchange rates. |
| doi_str_mv | 10.2307/2953667 |
| format | article |
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| identifier | ISSN: 0022-2879 |
| ispartof | Journal of money, credit and banking, 1997-11, Vol.29 (4), p.783-806 |
| issn | 0022-2879 1538-4616 |
| language | eng |
| recordid | cdi_proquest_miscellaneous_839118627 |
| source | International Bibliography of the Social Sciences (IBSS); ABI/INFORM global; JSTOR Archival Journals and Primary Sources Collection |
| subjects | Analysis Economic models Economic theory Equilibrium Excess supply Exchange rates Foreign exchange Foreign exchange rates Gross national product Homes Inflation Interest rates Monetary policy Monetary theory Money Money supply Monopolistic competition Nominal interest rates Nominal prices Policy making Price flexibility Prices Production Studies |
| title | Short-Run Independence of Monetary Policy under Pegged Exchange Rates and Effects of Money on Exchange Rates and Interest Rates |
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