Optimal monetary policy in a small open economy under segmented asset markets and sticky prices /

Optimal monetary policy in a small open economy under segmented asset markets and sticky prices /

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Bibliographic Details
Author / Creator:Lama, Ruy, 1975- author.
Imprint:Washington, D.C. : International Monetary Fund, IMF Institute, 2007.
Description:1 online resource (55 pages) : illustrations
Language:English
Series:IMF working paper ; WP/07/217
IMF working paper ; WP/07/217.
Subject:
Monetary policy -- Econometric models.
Market segmentation -- Econometric models.
Prices -- Econometric models.
Economic policy -- Econometric models.
Economic policy -- Econometric models.
Market segmentation -- Econometric models.
Monetary policy -- Econometric models.
Prices -- Econometric models.
Format: E-Resource Book
URL for this record:http://pi.lib.uchicago.edu/1001/cat/bib/12497237
Hidden Bibliographic Details
Other authors / contributors:Medina Guzman, Juan Pablo, 1971- author.
International Monetary Fund, issuing body.
IMF Institute, issuing body.
ISBN:1282448080
9781282448087
Notes:Includes bibliographical references (pages 31-34).
Restrictions unspecified
Electronic reproduction. [Place of publication not identified] : HathiTrust Digital Library, 2010.
Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212
digitized 2010 HathiTrust Digital Library committed to preserve
Print version record.
Summary:This paper studies optimal monetary policy in a two-sector small open economy model under segmented asset markets and sticky prices. We solve the Ramsey problem under full commitment, and characterize the optimal monetary policy in a calibrated version of the model. The findings of the paper are threefold. First, the Ramsey solution mimics the allocations under flexible prices. Second, under the optimal policy the volatility of non-tradable inflation is close to zero. Third, stabilizing nontradable inflation is optimal regardless of the financial structure of the small open economy. Even for a moderate degree of price stickiness, implementing a monetary policy that mitigates asset market segmentation is highly distortionary. This last result suggests that policymakers should resort to other policy instruments in order to correct financial imperfections.
Other form:Print version: Lama, Ruy, 1975- Optimal monetary policy in a small open economy under segmented asset markets and sticky prices. Washington, D.C. : International Monetary Fund, IMF Institute, 2007
Table of Contents:
  • 1. Introduction; 2. Model; A. Households; B. Firms in Tradable Sector; C. Firms in Non-Tradable Sector; D. Government; E. International Transactions; F. Market Clearing Conditions; G. Equilibrium; 3. Ramsey Problem; 4. Dynamics under the Optimal Policy; A. Calibration; B. Optimal Monetary Policy in a Model with Sticky Prices; C. Optimal Monetary Policy in a Model with Sticky Prices and Asset Market Segmentation; 5. Concluding Remarks; References; Appendix; A. Lagrangian of the Ramsey Problem; B. Benchmark Two-sector Real Model.

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