TY  - JOUR
AU  - Darby,Michael R.
TI  - Monetary Policy in the Large Open Economy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1127
PY  - 1985
Y2  - September 1985
UR  - http://www.nber.org/papers/w1127
L1  - http://www.nber.org/papers/w1127.pdf
N1  - Author contact info:
Michael R. Darby
John E. Anderson Graduate School of Management
University of California, Los Angeles
110 Westwood Plaza, Box 951481
Los Angeles, CA 90095-1481
Tel: 310/825-4180
Fax: 310/454-2748
E-Mail: michael.r.darby@anderson.ucla.edu
AB  - This paper discusses recent evidence on the imperfect international substitutability of goods and assets and the implications for conduct of monetary policy in a major industrial country. A simple model is developed for analysis of the simultaneous determination of money growth and the balance of payments under pegged exchange rates. Parallels are drawn to the importance of expected depreciation in determination of floating exchange rates. An assessment is made of the extent to which a central bank can simultaneously pursue both exchange rate and money supply goals through sterilized intervention. The paper concludes with the role of saving rate differences in determining nonzero equilibrium trade balances.
ER  -