Inflation targeting rules and welfare in an asymmetric currency area

• 成果类型: Article
• 署名作者: Lombardo, G
• 署名单位: European Central Bank
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2005.05.013
• 发表日期: 2006
• 页码: 424-442
• 关键词: asymmetric currency area; Monetary policy rules; imperfect competition; sticky prices; second-order approximation

摘要

This paper studies the effect on monetary policy of differing degrees of competition and differing degrees of nominal rigidity between the members of a monetary union. In particular, we assess the welfare loss brought about by the use of a simple interest rate rule that does not take into account such structural differences. Our results show that, ceteris paribus, to maximize welfare the central bank should react more strongly to inflation pressure generated by the more competitive economies. Our work extends the results of Benigno [Benigno, P., 2004. Optimal monetary policy in a currency area. Journal of International Economics 63, 293-320] by showing that, if the degree of competition differs between countries, the optimal rule could involve placing a greater weight on the more flexible countries. Our study suggests that the size of the welfare losses generated by failure to take account of these asymmetries depends crucially on the actual combination of the various asymmetries. As a consequence, we show that, if the optimal weights are chosen under incomplete information regarding the extent and type of asymmetries, the resulting level of welfare could be lower than that produced by the symmetric rule. (c) 2005 Elsevier B.V. All rights reserved.