The Exchange Rate Targeting of Central Banks Revised: The Role of Long-term Interest Rates

Please use this identifier to cite or link to this item: http://dspace.mediu.edu.my:8181/xmlui/handle/10419/17951

Title:	The Exchange Rate Targeting of Central Banks Revised: The Role of Long-term Interest Rates
Keywords:	E52 E32 E58 ddc:330 Open economy Exchange rate determination Monetary policy
Issue Date:	16-Oct-2013
Publisher:	Kiel Institute for the World Economy (IfW) Kiel
Description:	Using a New Keynesian macro model, the paper reconsiders the question, whether the central banks should directly respond to exchange rate movements. It is assumed that the transmission of monetary policy to output is carried out by the long-term interest rate, which is determined as a sum of expectations of short-term interest rates and a non-negligible term premium. According to the results, the central banks could gain from stabilizing the exchange rate movements more than suggested in the previous literature. The welfare gains are more clearly seen in the reduced volatility of inflation than stabilization of output, however.
URI:	http://koha.mediu.edu.my:8181/xmlui/handle/10419/17951
Other Identifiers:	http://hdl.handle.net/10419/17951 ppn:558294448 RePEc:zbw:ifwedp:5733
Appears in Collections:	EconStor

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