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Monetary Policy, Determinacy, and Learnability in a Two‐Block World Economy

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  • JAMES BULLARD
  • ERIC SCHALING

Abstract

We study how determinacy and learnability of worldwide rational expectations equilibrium may be affected by monetary policy in a simple, two‐country, New Keynesian framework under both fixed and flexible exchange rates. We find that open economy considerations may alter conditions for determinacy and learnability relative to closed economy analyses and that new concerns can arise in the analysis of classic topics such as the desirability of exchange rate targeting and monetary policy cooperation.

Suggested Citation

  • James Bullard & Eric Schaling, 2009. "Monetary Policy, Determinacy, and Learnability in a Two‐Block World Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(8), pages 1585-1612, December.
    • Handle: RePEc:wly:jmoncb:v:41:y:2009:i:8:p:1585-1612
    DOI: 10.1111/j.1538-4616.2009.00268.x
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    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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