A Welfare Evaluation of East Asian Monetary Policy Regimes under Foreign Output Shock

Date: February 2012
Type: Papers and Briefs
Subject:
Series: Economics Working Papers
ISSN: 1655-5252 (print)
Author: Alba, Joseph D.; Park, Donghyun; Chia, Wai-Mun

Description

This paper assesses the welfare impact of external shocks under different monetary policy regimes in East and Southeast Asia. To do so, the authors numerically solve and calculate the welfare loss function of a dynamic stochastic general equilibrium (DSGE) model with complete exchange rate pass through. Their DSGE model simulation results suggest that consumer price index inflation targeting delivers the least welfare losses for most small open economies in East and Southeast Asia.

Contents

  • Abstract
  • Introduction
  • Role of Monetary and Exchange Rate Policies in Cushioning External Shocks
  • The Model
  • Simulation Results and Welfare
  • Conclusions
  • References