قوانین سیاست های پولی و نرخ ارز

A stochastic sticky-price general-equilibrium model is employed to explore the welfare effects of optimal monetary policy and of a range of simple targeting rules. Idiosyncratic shocks to the traded and the non-traded goods sectors may make it impossible for monetary policy to achieve an efficient sectoral resource allocation within countries and avoid inefficient relative price changes across countries. An inward-looking monetary policy is generally not optimal. Which simple, i.e. non-optimal, targeting rule best approximates the fully optimal rule depends on the elasticity of intratemporal substitution. Policies of producer price targeting, consumer price targeting and exchange rate targeting may be the best option for different values of the intratemporal substitution elasticity. Nominal income and monetary targeting generally perform worst.

Is there a difference between the optimal choice of a monetary policy target in open and closed economies? Some authors argue that the policy problems in both cases are identical. The two-country models by, e.g., Obstfeld and Rogoff, 2002 and Clarida et al., 2001, suggest that policymakers in open economies should follow an completely inward-looking monetary policy.1 The work of, among others, Gali and Monacelli (2005) corroborates this result for the small open economy case. Policy adjustments in neighboring countries can be ignored when deciding about the monetary policy stance. These authors argue that producer prices should be chosen as a target for welfare-maximizing monetary policy. Targeting producer prices brings about the welfare-maximizing resource allocation because the distortions created by price stickiness are neutralized. Other authors, for example, Corsetti and Pesenti, 2005 and Sutherland, 2005 for two-country worlds and Devereux et al. (2006), Smets and Wouters, 2002 and Sutherland, 2006 for small open economies point out that this policy prescription is only valid under special circumstances. The presence of cost-push shocks, a limited degree of pass-through of exchange rate changes into prices and a strong expenditure switching effect owing to a high intratemporal elasticity of substitution are among the factors that require the consideration of policy changes abroad. In this paper, we will not focus on these points but revisit the optimal choice of a monetary policy target in a two-country world by introducing a novel trade-off for the policymakers into an otherwise standard stochastic general-equilibrium model. In doing so, we are not only concerned with the optimal design of monetary policy but also analyze which simple, i.e. non-optimal, rule best supports the optimal solution. In practice, many central banks follow simple targeting rules because fully optimal rules may be infeasible to implement. In our model, policymakers are caught between realizing the efficient resource allocation within a country and across countries. We suppose that the tradeable and the non-tradeable goods sectors of both economies are hit by idiosyncratic sectoral shocks. In this setting, a monetary response to a sectoral shock alters both the resource allocation between sectors within a country and the resource allocation across countries. Thus, inefficiencies may arise. Consider, e.g., a productivity shock in the home non-traded goods sector. Such a shock calls for a re-allocation of resources between the home traded goods and the home non-traded goods sector, but for the relative price between home and foreign tradeables to remain constant. Both goals, however, cannot be achieved simultaneously by a monetary adjustment, since a monetary adjustment in one country will affect the exchange rate and thus international relative prices. In our model, an inward-looking monetary policy is only optimal for special parameter combinations. Generally, monetary policy responds to productivity shocks and monetary policy changes abroad. Policies such as producer price index targeting, consumer price index targeting, nominal income targeting, monetary targeting and exchange rate targeting are among the most prominent rules that have been used or are currently being used as a guide for monetary policy. The welfare ranking of these simple targeting rules in our model hinges critically on the value of the intratemporal elasticity of substitution. Sutherland (2006) also points to this parameter as the key factor for the optimal choice of the monetary target in a small open economy. He argues that a high value for this elasticity leads to large fluctuations in the demand for domestically produced goods. It may therefore be optimal for a small open economy to stabilize its terms of trade through an exchange rate peg. Interestingly, his substantive results are found to carry over to the two-country case studied in this paper. In our model, monetary policy adjustments may give rise to inefficient exchange rate changes, i.e. changes that are not backed by productivity differentials in the traded goods sectors. The resulting misallocation of resources may give exchange rate stabilization a role. For low values of intratemporal elasticity of substitution, producer price targeting best approximates the fully optimal policy rule. In this case, inefficiencies in cross-country resource allocation are only moderate. If this elasticity turns out to be very high, maintaining the exchange rate fixed is the best simple rule. For intermediate values, a policy of consumer price index targeting yields the highest welfare. Such a policy can be understood as a compromise between producer price index and exchange rate targeting because it involves both the stabilization of goods prices and the stabilization of the exchange rate. Nominal income and monetary targeting generally are welfare inferior to the other policy rules.2 The remainder of the paper is structured as follows. The model is developed in the next section. In Section 3, the optimal monetary policy rule and welfare under the optimal policy rule are derived. Section 4 compares the welfare results of five simple targeting rules. Section 5 concludes.

This paper contributes to the growing literature on the optimal choice of the monetary policy target in open economies. In our model, policymakers face a trade-off between re-allocating resources optimally within and across countries when reacting to sectoral productivity shocks. The policy response to a shock in the home non-tradeable sector not only alters the resource allocation between the home country’s sectors as required, but also changes the relative price between home and foreign tradeables, which is inefficient. Similarly, a shock to both countries’ traded goods sectors calls for a change in both economies’ sectoral resource allocation and a change in the relative price of traded goods. However, idiosyncratic shocks to both countries’ non-traded goods sectors will interfere with the aim of adjusting the terms of trade optimally. The optimal monetary policy is a compromise between both goals. An inward-looking monetary policy, as suggested in recent work, is only optimal for special parameter combinations. Generally, the optimal monetary policy rules lead to flexible exchange rates. Optimal policy rules may not be feasible to implement. We therefore ask which simple, i.e. non-optimal, targeting rule comes closest in welfare terms to the fully optimal rule. A range of simple rules is investigated. It is found that producer price targeting most closely approximates the fully optimal policy for low values of the elasticity of intratemporal substitution, while a fixed exchange rate is the best policy option for high values. For intermediate values of the intratemporal substitution elasticity a policy of targeting the consumer price index (which can be interpreted as a compromise between producer price and exchange rate targeting) yields the highest welfare. In future work, it would be interesting to consider some extensions to the model to check the robustness of the results. A natural extension is the consideration of only a limited degree of exchange rate pass-through to investigate how the welfare ranking of the policy rules is affected if the effect of exchange rate changes on relative prices is dampened. Furthermore, the inclusion of shocks other than productivity, and of other sources of nominal inertia along the lines of Erceg et al. (2000), might prove fruitful.