OPEN-ECONOMY MARKET: Conclusions

In Table 5 we consider additional rule specifications designed to shed light on various issues concerning nominal income, inflation, and exchange rate targeting. First we consider three cases relating to the issue of growth-rate versus growing-levels targets for nominal variables. In the present case the implicit rate of increase is zero, but that magnitude is […]

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OPEN-ECONOMY MARKET: Simulation Results 3

In Table 3 we turn to the topic of nominal income targeting. In particular, we now compare the macroeconomic consequences of changing rule (8.1) to one of the form Here Axt enters where Ap, appears in rule (8.1). With \i2 = 0, the rule implies NIT, leavened with realistic interest rate-smoothing behavior. A comparison of […]

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OPEN-ECONOMY MARKET: Simulation Results 2

Before turning to the topic of nominal income targeting, let us consider the background results reported in Table 2 for cases involving several variants of the Taylor rule (Taylor [1993a]) with both the open and closed economy versions of our model. Here the policy rule is of the form where po is in principle set […]

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OPEN-ECONOMY MARKET: Simulation Results

The characteristics of the model’s impulse response functions are dependent, in our forward-looking rational expectations setup, on the policy rule. It may be of interest to examine the effects — for the Rt policy shock only — of two separate alterations of that rule. First, let us set |i2= 0, thereby eliminating the rule’s response […]

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