• norsk
    • English
  • English 
    • norsk
    • English
  • Login
View Item 
  •   Home
  • Handelshøyskolen BI
  • BI Research Centre's Series
  • Centre for Applied Macro- and Petroleum economics (CAMP)
  • View Item
  •   Home
  • Handelshøyskolen BI
  • BI Research Centre's Series
  • Centre for Applied Macro- and Petroleum economics (CAMP)
  • View Item
JavaScript is disabled for your browser. Some features of this site may not work without it.

Monetary policy when export revenues drop

Bergholt, Drago; Røisland, Øistein; Sveen, Tommy; Torvik, Ragnar
Working paper
Thumbnail
View/Open
CAMP_WP_4_2022.pdf (766.7Kb)
URI
https://hdl.handle.net/11250/3032376
Date
2022-11
Metadata
Show full item record
Collections
  • Centre for Applied Macro- and Petroleum economics (CAMP) [140]
Abstract
We study how monetary policy should respond to shocks which permanently alter the steady state structure of the economy. In such a case monetary policy affects not only the short run misallocations due to nominal rigidities, but also relative prices which stimulate reallocation of capital. We consider a permanent and negative shock to export revenues that requires a larger traded sector and a smaller non-traded sector in the new steady state. This reallocation calls for a change in relative prices during the transition, but may also lead to a period of high unemployment. We show how an appropriate monetary policy could mitigate the welfare costs of the transition by allowing the exchange rate to depreciate, and thereby allowing inflation to increase in the short run. Traditional monetary policy regimes, such as inflation targeting or a fixed exchange rate, would imply high unemployment and inefficiently slow transition. Stabilizing nominal wage growth, in contrast, would be close to the welfare-optimal monetary policy.
Publisher
BI Norwegian Business School
Series
CAMP Working Paper Series;04/2022

Contact Us | Send Feedback

Privacy policy
DSpace software copyright © 2002-2019  DuraSpace

Service from  Unit
 

 

Browse

ArchiveCommunities & CollectionsBy Issue DateAuthorsTitlesSubjectsDocument TypesJournalsThis CollectionBy Issue DateAuthorsTitlesSubjectsDocument TypesJournals

My Account

Login

Statistics

View Usage Statistics

Contact Us | Send Feedback

Privacy policy
DSpace software copyright © 2002-2019  DuraSpace

Service from  Unit