Pricing-to-market and optimal interest rate policy

I study optimal interest rate policy in a small open economy with consumer search in the product market. When there are search frictions, firms price-to-market, with implications for the design of monetary policy. Country-specific shocks generate deviations from the law of one price for traded goods which monetary policy acts to stabilize by influencing firm markups. However, stabilizing law of one price deviations results in greater fluctuations in output.

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Year of publication:	2014-08-01
Authors:	Cooke, Dudley
Institutions:	Federal Reserve Bank of Dallas
Subject:	interest rates \| monetary policy \| price

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Extent:	application/pdf
Series:	Globalization and Monetary Policy Institute Working Paper.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series Globalization and Monetary Policy Institute Working Paper Number 187 23 pages
Classification:	E31 - Price Level; Inflation; Deflation ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; F41 - Open Economy Macroeconomics
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011084958