Policy Choices under Different Exchange Rate Regimes
In this chapter the behaviour of the financial model, described in the previous chapter, is analysed under different exogenous disturbances. All disturbances are of the unexpected kind and can thus be considered as ‘news’. It is well known from the rational expectations literature that only expected disturbances are already reflected in prices, exchange rates, and interest rates.
KeywordsExchange Rate Interest Rate Monetary Policy Exchange Rate Regime Annual Percentage Change
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