Monetary Policy in a Low Pass-through Environment
In a dynamic New Keynesian optimizing model, we introduce incomplete exchange rate pass-through on import prices. Three results stand out. First, unlike canonical models with perfect pass-through which emphasize a type of isomorphism, incomplete pass-through renders the analysis of monetary policy o...
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| Veröffentlicht in: | Journal of money, credit and banking credit and banking, 2005-12, Vol.37 (6), p.1047-1066 |
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| container_end_page | 1066 |
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| container_issue | 6 |
| container_start_page | 1047 |
| container_title | Journal of money, credit and banking |
| container_volume | 37 |
| creator | Monacelli, Tommaso |
| description | In a dynamic New Keynesian optimizing model, we introduce incomplete exchange rate pass-through on import prices. Three results stand out. First, unlike canonical models with perfect pass-through which emphasize a type of isomorphism, incomplete pass-through renders the analysis of monetary policy of an open economy fundamentally different from the one of a closed economy. Second, productivity-driven deviations from the law of one price assume the interpretation of endogenous cost-push shocks. Third, the optimal commitment policy, relative to discretion, entails a smoothing of the deviations from the law of one price and requires more stable nominal and real exchange rates. |
| doi_str_mv | 10.1353/mcb.2006.0007 |
| format | Article |
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| ispartof | Journal of money, credit and banking, 2005-12, Vol.37 (6), p.1047-1066 |
| issn | 0022-2879 1538-4616 1538-4616 |
| language | eng |
| recordid | cdi_proquest_journals_195349409 |
| source | Jstor Complete Legacy |
| subjects | Closed economies Economic models Foreign exchange rates Government regulation Import prices International trade Law of one price Laws, regulations and rules Monetary policy Open economies Output gaps Productivity Real exchange rates Studies |
| title | Monetary Policy in a Low Pass-through Environment |
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