This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window
Open in New Tab
Open in same window
American Economic Review: Vol. 101 No. 6 (October 2011)
AER Volume. 101, Issue 6 | 
Previous ArticleNext Article
Sign up for Email Alerts Follow us on Twitter
AER Forthcoming Articles
Full-text Article
Online Appendix (272.30 KB)
Previous ArticleNext Article
Expand
Quick Tools:
Print Article Summary Email Link to this Article Export CitationSign up for Email Alerts Follow us on Twitter
Explore:
AER Forthcoming Articles
Currency Misalignments and Optimal Monetary Policy: A Reexamination
Article Citation
Engel, Charles. 2011. "Currency Misalignments and Optimal Monetary Policy: A Reexamination."
American Economic Review,
101(6): 2796-2822.
DOI: 10.1257/aer.101.6.2796
DOI: 10.1257/aer.101.6.2796
Abstract
This paper examines optimal monetary policy in an open-economy two-country world with sticky prices under pricing to market. We show that currency misalignments are inefficient and lower world welfare. We find that optimal policy must target consumer price inflation, the output gap, and the currency misalignment. The paper derives the loss function of a cooperative monetary policymaker and the optimal targeting rules. The model is a modified version of Clarida, Galí, and Gertler (JME, 2002). The key change is that we allow pricing to market or local-currency pricing and consider the policy implications of currency misalignments. (JEL E52, F31, F41)
Article Full-Text Access
Full-text Article
Additional Materials
Online Appendix (272.30 KB)
Authors
Engel, Charles (U WI)
JEL Classifications
E52: Monetary Policy
F31: Foreign Exchange
F41: Open Economy Macroeconomics
F31: Foreign Exchange
F41: Open Economy Macroeconomics
