Monetary Policy in a Small Open Economy with Credit Goods Production

Author/Editor:

Jorge A Chan-Lau

Publication Date:

October 1, 1998

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The paper analyzes the effects of monetary policy in a dynamic model of a small open economy with cash and credit goods production, where government consumption is financed by seignorage. It shows that the interrelationships between the growth rate of the monetary aggregate and the technological properties of the economy have an important bearing on the existence and uniqueness of equilibrium, the optimal inflation rate, and the occurrence of explosive hyperinflations. In consequence, the paper concludes that monetary policy does matter in the long run.

Series:

Working Paper No. 1998/153

Subject:

Consumption Credit Currencies Inflation Labor

English

Publication Date:

October 1, 1998

ISBN/ISSN:

9781451922448/1018-5941

Stock No:

WPIEA1531998

Pages:

19

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