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Title: |
Optimal Monetary Policy with an
Interest-Equalization Tax in a Small Open Economy |
| Author: |
Benavie,
Arthur; Froyen, Richard |
| Author
Affiliation: |
U NC |
| Source: |
International Economic Journal, Winter 1991, v. 5, no. 4, pp. 1-16 |
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Publication Date: |
Winter 1991 |
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Abstract: |
Uncovered interest rate parity (UIP)
severely constrains the ability of monetary policy to achieve domestic
stabilization goals. In a model which does not include an imported
input, control of a wage indexation parameter enhances the effectiveness
of monetary policy considerably. Here, wage indexation is shown to be
less effective when used with monetary policy in a framework that does
include an imported intermediate good. Monetary policy effectiveness is,
however, significantly enhanced by incorporating an
interest-equalization tax stabilizer into the framework. |
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