Monetary Policy under Alternative Asset Market Structures : the Case of a Small Open Economy

  title={Monetary Policy under Alternative Asset Market Structures : the Case of a Small Open Economy},
  author={Bianca De Paoli},
  • Bianca De Paoli
  • Published 2009
Can the structure of asset markets change the way monetary policy should be conducted? Following a linear-quadratic approach, the present paper addresses this question in a New Keynesian small open economy framework. Our results reveal that the configuration of asset markets significantly affects optimal monetary policy and the performance of standard policy rules. In particular, when comparing complete and incomplete markets, the ranking of policy rules is entirely reversed, and so are the… CONTINUE READING

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