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Title: |
Sticky Prices and Alternative Monetary Feedback Rules: How Robust Is the
Overshooting Phenomenon? |
| Author: |
Kempa, Bernd;
Nelles, Michael |
| Author
Affiliation: |
U Essen |
| Source: |
International Economic Journal, Autumn 1999, v. 13, no. 3, pp. 1-18 |
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Publication Date: |
Autumn 1999 |
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Abstract: |
The present paper incorporates a mechanism
of rules-based central-bank interventions into a Dornbusch-type
framework. We show that the implied reactions of exchange rates and
interest rate differentials in response to a monetary shock depend
crucially on the particular monetary policy feedback rule. The Dornbusch
case of positively correlated and overshooting nominal and real exchange
rates as well as nominal and real interest rate differentials is only
one of the possible scenarios of our model. Different scenarios imply
zero and negative correlations and even multiple overshooting. |
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