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| Content Provider | Springer Nature Link |
|---|---|
| Author | Kim, Kunhong Krawczyk, Jacek B. |
| Copyright Year | 2013 |
| Abstract | We extend Krawczyk and Kim (Macroecon Dyn 13(1):46–80, 1999) and apply a viability approach to a small-open economy where the exchange rate works as an additional monetary policy transmission channel. A continuous-time version of the model presented in Batini and Haldane (In: Monetary policy rules. National Bureau of Economic Research, Cambridge, pp. 157–202, 1999a) is used. The model comprises the IS equation, a supply curve and the interest parity condition. We modify the third equation to capture an impact of a domestic interest-rate hike on the speedy appreciation of local currency. We calibrate this modified model using available literature results and apply specialised software (VIKAASA) to compute the open-economy viability kernel that is a set of economic states, from which the central bank can control the economy so that it remains within a nominal constraint set. We then analyse the kernel topology and show a few stablising policies that keep the economy within the constraint set. We also discuss the robustness of such polices to shocks and parameter uncertainty and observe that viability-based policies come from models, which do not require explicit weights on the variables of interest of a central bank. We also contend that in general, viability-based policies are less likely to do damage, if the policy-maker is wrong about some aspects of the environment. |
| Ending Page | 268 |
| Page Count | 36 |
| Starting Page | 233 |
| File Format | |
| ISSN | 09277099 |
| e-ISSN | 15729974 |
| Journal | Computational Economics |
| Issue Number | 2 |
| Volume Number | 43 |
| Language | English |
| Publisher | Springer US |
| Publisher Date | 2013-01-26 |
| Publisher Place | Boston |
| Access Restriction | One Nation One Subscription (ONOS) |
| Subject Keyword | Small-open economy Economic dynamics Macro-economic models (monetary models, models of taxation) Monetary policy Economic Theory Viability VIKAASA |
| Content Type | Text |
| Resource Type | Article |
| Subject | Economics, Econometrics and Finance Computer Science Applications |
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