Monetary policy and exchange rate dynamics in a behavioral open economy model

• 成果类型: Article
• 署名作者: Kolasa, Marcin; Ravgotra, Sahil; Zabczyk, Pawel
• 署名单位: International Monetary Fund; Warsaw School of Economics; University of Texas System; University of Texas Austin
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2025.104087
• 发表日期: 2025
• 关键词: Monetary policy; Exchange rates; UIP condition; bounded rationality

摘要

We analyze the implications of adding boundedly rational agents & aacute; la Gabaix (2020) to the canonical New Keynesian open economy model. We show that accounting for myopia mitigates several puzzling aspects of the relationship between exchange rates and interest rates and helps explain why some of them only arise in the nested case of rational expectations. Bayesian estimation of the model demonstrates that a high degree of cognitive discounting significantly improves empirical fit. We also show that this form of bounded rationality makes positive international monetary spillovers more likely and exacerbates the unit root problem in small open economy models with incomplete markets.