TY  - JOUR
AU  - Ball,Laurence M.
TI  - Policy Responses to Exchange-Rate Movements
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15173
PY  - 2009
Y2  - July 2009
UR  - http://www.nber.org/papers/w15173
L1  - http://www.nber.org/papers/w15173.pdf
N1  - Author contact info:
Laurence M. Ball
Department of Economics
Johns Hopkins University
Baltimore, MD 21218
Tel: 410/516-7605
Fax: 410/516-7600
E-Mail: lball@jhu.edu
AB  - This paper examines policy responses to exchange-rate movements in a simple model of an open economy.  The optimal response of monetary policy to an exchange-rate change depends on the source of the change: on whether the underlying shock is a shift in capital flows, manufactured exports, or commodity prices.  The paper compares the model’s prescriptions to the policies of an actual central bank, the Bank of Canada.  Finally, the paper considers the role of fiscal policy in an open economy.  Coordinated fiscal and monetary responses to exchange-rate movements stabilize output at the sectoral as well as aggregate level.
ER  -