A note on stock price dynamics and monetary policy in a small open economy

Ida, Daisuke and Okano, Mitsuhiro and Hoshino, Satoshi (2024): A note on stock price dynamics and monetary policy in a small open economy.

Abstract

This note examines the role of stock price stabilization in a small open new Keynesian model. We show that stabilizing stock prices is desirable to attain a unique rational expectations equilibrium and that the open economy effect has a significant impact on the determinacy condition.

• Item Type: MPRA Paper
• Language: English
• Keywords: Stock prices; Monetary policy rules; Terms of trade; Indeterminacy; Taylor principle
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics

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