Inspecting Monetary Policy Rules in a Small Open Economy with Financial Frictions

Autor:	Yongseung Jung
Jazyk:	angličtina
Rok vydání:	2023
Předmět:	financial frictions monetary policy small open economy welfare loss Economics as a science HB71-74
Zdroj:	East Asian Economic Review, Vol 27, Iss 2, Pp 115-143 (2023)
Druh dokumentu:	article
ISSN:	2508-1640 2508-1667
DOI:	10.11644/KIEP.EAER.2023.27.2.420
Popis:	In this paper, we address how the monetary authority should react to financial market status and exchange rates movements in a small open economy New Keynesian model with financial frictions due to asymmetric information between savers and borrowers. We show that the small economy with financial frictions is more susceptible to the exogenous shocks under the fixed exchange rate regime than under the flexible exchange regime. The small economy experiences a more prolonged and deeper economic recession under the fixed exchange rate regime than under the flexible exchange rate regime. The monetary policy taking into account external finance premium is better than the interest rate rule without considering the financial market status.
Databáze:	Directory of Open Access Journals
Externí odkaz:	https://doaj.org/article/9cdb58c2f2284d5e8298e7e7261a748c Zobrazit plný text záznamu View record in DOAJ Plný text ve formátu PDF