Balance sheets, exchange rate policy, and welfare, Issue 2004
Selim Elekdag, Ivan Tchakarov, International Monetary Fund. Middle East and Central Asia Dept, International Monetary Fund. Research Dept
International Monetary Fund, 2004 - Business & Economics - 36 pages
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Alternative Welfare Comparison using a FirstOrder Approximation
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16 percent 31 percent accurate welfare Adjustment cost augmented Taylor rule balance sheet effects behavior central bank Cespedes Chang and Velasco collateral constraints consumption and labor debt-to-GDP ratio denotes consumption depreciation Devereux and Lane Domestic Interest Rate DYNARE elasticity of substitution Elekdag emerging market economies entrepreneur exchange rate regimes external shocks financial accelerator channel Financial Accelerator Present financial frictions first-order approximation fixed and flexible fixed exchange rate flexible exchange rate Float Peg Float floating exchange rate foreign currency denominated Gertler implies impulse response infratemporal elasticity insulate the economy interest rate rule levels of indebtedness macroeconomic monetary authorities monetary policy monopolistically competitive Mundell-Fleming model Natalucci 2003 Negative Export Shock nominal exchange rate optimal parameters peg dominates Peg Float Peg RealXR risk premium second-order approximation small open economy Standard Deviations steady-state consumption sticky prices Table technology shock unpublished welfare analysis welfare comparisons Welfare Loss welfare measure welfare metric welfare ranking worth