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A note on stock price dynamics and monetary policy in a small open economy

Author

Listed:
  • Ida, Daisuke
  • Okano, Mitsuhiro
  • Hoshino, Satoshi

Abstract

This note examines the role of stock price stabilization in a small open new Keynesian model. We show that stabilizing stock prices is desirable to attain a unique rational expectations equilibrium and that the open economy effect has a significant impact on the determinacy condition.

Suggested Citation

  • Ida, Daisuke & Okano, Mitsuhiro & Hoshino, Satoshi, 2024. "A note on stock price dynamics and monetary policy in a small open economy," MPRA Paper 121050, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:121050
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    File URL: https://mpra.ub.uni-muenchen.de/121050/1/MPRA_paper_121050.pdf
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    References listed on IDEAS

    as
    1. Charles T. Carlstrom & Timothy Fuerst, 2007. "Asset Prices, Nominal Rigidities, and Monetary Policy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(2), pages 256-275, April.
    2. Jordi Galí & Tommaso Monacelli, 2005. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 707-734.
    3. Luis-Gonzalo Llosa & Vicente Tuesta, 2008. "Determinacy and Learnability of Monetary Policy Rules in Small Open Economies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(5), pages 1033-1063, August.
    4. Giorgio Di Giorgio & Salvatore Nistico, 2007. "Monetary Policy and Stock Prices in an Open Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(8), pages 1947-1985, December.
    5. Muto, Ichiro, 2011. "Monetary policy and learning from the central bank's forecast," Journal of Economic Dynamics and Control, Elsevier, vol. 35(1), pages 52-66, January.
    6. Stephen G. Cecchetti & Hans Genberg & Sushil Wadhwani, 2002. "Asset Prices in a Flexible Inflation Targeting Framework," NBER Working Papers 8970, National Bureau of Economic Research, Inc.
    7. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    8. Ida, Daisuke, 2011. "Monetary policy and asset prices in an open economy," The North American Journal of Economics and Finance, Elsevier, vol. 22(2), pages 102-117, August.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Stock prices; Monetary policy rules; Terms of trade; Indeterminacy; Taylor principle;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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