Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
965647 | Journal of Macroeconomics | 2006 | 27 Pages |
Abstract
This paper evaluates the performance of simple policy rules in an open economy. By introducing a high degree of exchange rate uncertainty we find that policy rules with an important feedback from movements in the real exchange rate are very robust to uncertainty about the true exchange rate model. A closed economy rule performs badly in most exchange rate specifications. This is in contrast to the findings of many other studies. In our view, this result is due to the fact that these studies assume a known and reliable relationship between the exchange rate and the interest rate.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Timo Wollmershäuser,