Monetary Policy in a Small Open Economy with Credit Goods Production [electronic resource] / Jorge A Chan-Lau.
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TextSeries: IMF Working Papers; Working Paper ; No. 98/153Publication details: Washington, D.C. : International Monetary Fund, 1998Description: 1 online resource (19 p.)ISBN: 1451922442 :ISSN: 1018-5941Subject(s): Cash Goods | Credit Goods | Inflation Rate | Monetary Aggregate | Nominal Interest Rate | Small Open EconomyAdditional physical formats: Print Version:: Monetary Policy in a Small Open Economy with Credit Goods ProductionOnline resources: IMF e-Library | IMF Book Store Abstract: The paper analyzes the effects of monetary policy in a dynamic model of a small open economy with cash and credit goods production, where government consumption is financed by seignorage. It shows that the interrelationships between the growth rate of the monetary aggregate and the technological properties of the economy have an important bearing on the existence and uniqueness of equilibrium, the optimal inflation rate, and the occurrence of explosive hyperinflations. In consequence, the paper concludes that monetary policy does matter in the long run.
The paper analyzes the effects of monetary policy in a dynamic model of a small open economy with cash and credit goods production, where government consumption is financed by seignorage. It shows that the interrelationships between the growth rate of the monetary aggregate and the technological properties of the economy have an important bearing on the existence and uniqueness of equilibrium, the optimal inflation rate, and the occurrence of explosive hyperinflations. In consequence, the paper concludes that monetary policy does matter in the long run.
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