IDEAS home Printed from https://ideas.repec.org/a/bla/ausecp/v46y2007i2p136-151.html
   My bibliography  Save this article

Exchange Rate Stabilisation, Learning And The Taylor Principle

Author

Listed:
  • HEINZ‐PETER SPAHN

Abstract

The paper explores whether central banks can keep their interest rates independent from given foreign rates, and to what extent interest policies designed to stabilise nominal exchange rate changes can be applied instead of, or in addition to, the traditional interest rate response to inflation gaps. This modification of a Taylor Rule is analysed in a simple macro model with some New Keynesian features. Information is imperfect; agents cannot build rational expectations but try to learn ‘true’ market relations. Results show that the Taylor Principle can be generalised in an open economy with flexible exchange rates.

Suggested Citation

  • Heinz‐Peter Spahn, 2007. "Exchange Rate Stabilisation, Learning And The Taylor Principle," Australian Economic Papers, Wiley Blackwell, vol. 46(2), pages 136-151, June.
    • Handle: RePEc:bla:ausecp:v:46:y:2007:i:2:p:136-151
    DOI: 10.1111/j.1467-8454.2007.00310.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-8454.2007.00310.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-8454.2007.00310.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Karanassou, Marika & Sala, Hector & Snower, Dennis J., 2003. "The European Phillips Curve: Does the NAIRU Exist?," IZA Discussion Papers 876, Institute of Labor Economics (IZA).
    2. Eric Schaling & James Bullard, 2005. "Monetary Policy, Determinacy, and Learnability in the Open Economy," Computing in Economics and Finance 2005 362, Society for Computational Economics.
    3. Gianluca Benigno & Pierpaolo Benigno, 2004. "Designing Target Rules for International Monetary Policy Cooperation," CEP Discussion Papers dp0666, Centre for Economic Performance, LSE.
    4. Martin Ellison & Lucio Sarno & Jouko Vilmunen, 2004. "Monetary policy and learning in an open economy," Macroeconomics 0404022, University Library of Munich, Germany.
    5. Mark Crosby & Timothy Kam & Kirdan Lees, 2008. "How Costly is Exchange Rate Stabilisation for an Inflation Targeter? The Case of Australia," The Economic Record, The Economic Society of Australia, vol. 84(266), pages 354-365, September.
    6. repec:zbw:bofrdp:2004_003 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jan Gottschalk & Ulrich Fritsche, 2005. "The New Keynesian Model and the Long-Run Vertical Phillips Curve: Does It Hold for Germany?," Discussion Papers of DIW Berlin 521, DIW Berlin, German Institute for Economic Research.
    2. Mikko Puhakka, 2005. "Equilibrium dynamics under lump-sum taxation in an exchange economy with skewed endowments," Macroeconomics 0508033, University Library of Munich, Germany.
    3. Mewael F. Tesfaselassie & Eric Schaling & Sylvester Eijffinger, 2011. "Learning about the Term Structure and Optimal Rules for Inflation Targeting," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(8), pages 1685-1706, December.
    4. Jokivuolle, Esa & Lanne, Markku, 2004. "Trading Nokia : the roles of the Helsinki vs the New York stock exchanges," Research Discussion Papers 26/2004, Bank of Finland.
    5. Haberis, Alex & Lipińska, Anna, 2012. "International policy spillovers at the zero lower bound," Bank of England working papers 464, Bank of England.
    6. Andrea Vaona, 2013. "The Most Beautiful Variations on Fair Wages and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(6), pages 1069-1084, September.
    7. Karanassou, Marika & Sala, Hector & Snower, Dennis J., 2008. "Long-run inflation-unemployment dynamics: The Spanish Phillips curve and economic policy," Journal of Policy Modeling, Elsevier, vol. 30(2), pages 279-300.
    8. Karanassou, Marika & Sala, Hector & Snower, Dennis J., 2005. "A reappraisal of the inflation-unemployment tradeoff," European Journal of Political Economy, Elsevier, vol. 21(1), pages 1-32, March.
    9. Liam Graham & Dennis J. Snower, 2008. "Hyperbolic Discounting and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2-3), pages 427-448, March.
    10. Ascari, Guido & Rankin, Neil, 2007. "Perpetual youth and endogenous labor supply: A problem and a possible solution," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 708-723, December.
    11. Ronald Schettkat & Rongrong Sun, 2009. "Monetary policy and European unemployment," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 25(1), pages 94-108, Spring.
    12. Bilbiie, Florin O., 2014. "Delegating optimal monetary policy inertia," Journal of Economic Dynamics and Control, Elsevier, vol. 48(C), pages 63-78.
    13. Mikael Bask, 2009. "Optimal monetary policy under heterogeneity in currency trade," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 1(4), pages 338-354, November.
    14. Bask, Mikael & Selander, Carina, 2007. "Robust Taylor rules in an open economy with heterogeneous expectations and least squares learnig," Research Discussion Papers 6/2007, Bank of Finland.
    15. Funk Peter & Kromen Bettina, 2010. "Inflation and Innovation-Driven Growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-52, August.
    16. Michaelis, Jochen & Birk, Angela, 2006. "Employment- and growth effects of tax reforms," Economic Modelling, Elsevier, vol. 23(6), pages 909-925, December.
    17. Yu‐chin Chen & Pisut Kulthanavit, 2008. "Adaptive Learning And Monetary Policy In An Open Economy: Lessons From Japan," Pacific Economic Review, Wiley Blackwell, vol. 13(4), pages 405-430, October.
    18. William A. Barnett & Jingxian Hu, 2017. "Capital Control, Exchange Rate Regime, and Monetary Policy: Indeterminacy and Bifurcation," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201706, University of Kansas, Department of Economics, revised Sep 2017.
    19. Steinar Holden, 2005. "Wage Formation under Low Inflation," Springer Books, in: Hannu Piekkola & Kenneth Snellman (ed.), Collective Bargaining and Wage Formation, pages 39-57, Springer.
    20. Leitemo, Kai & Söderström, Ulf, 2008. "Robust Monetary Policy In The New Keynesian Framework," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S1), pages 126-135, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ausecp:v:46:y:2007:i:2:p:136-151. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0004-900X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.