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- Title
Optimal monetary policy in a regime-switching economy: the response to abrupt shifts in exchange rate dynamics.
- Authors
Zampolli, Fabrizio
- Abstract
The paper examines the trade-offs that the policymaker faces when the exchange rate can experience sustained deviations from its fundamental value and occasionally collapse. It employs a simple method that allows the researchers to solve for the optimal monetary policy in an economy subject to regime shifts, while retaining the flexibility and simplicity of more commonly applied methods. It provides an example of how policymakers can incorporate judgemental information about a potential misalignment into their macroeconomic model.
- Subjects
FOREIGN exchange rates; MONETARY policy; MONETARY theory; FISCAL policy; MACROECONOMICS
- Publication
Bank of England Quarterly Bulletin, 2006, Vol 46, Issue 2, p178
- ISSN
0005-5166
- Publication type
Article