How should monetary policy respond to capital inflows that appreciate the currency, widen current account deficit and cause domestic overheating? Using workhorse open-macro model, we derive a quadratic approximation of utility-based global loss function in incomplete market economies, solve for optimal targeting rules under cooperation characterize constrained-optimal allocation. The answer is ...

This paper derives a theoretical labour market model for the tradeables sector of a small open economy. Using Greek manufacturing data and applying multivariate cointegrating techniques, two cointegrating vectors are estimated based on the a priori restrictions provided by the theoretical model; a labour demand and a real exchange rate equation, respectively. The short-run estimates of the mode...

The real exchange rate (RER) misalignment is a key variable in academic and policy circles. Among policy circles, sustained RER overvaluations are observed by authorities for future exchange rate adjustments. Some countries, on the other hand, have pursued very active exchange rate policies in order to undervalue their currencies to foster growth through export promotion (e.g. China). Our goal ...

one of the problems associated with adaptive fir filters in the identification of systems with long impulse responses, is their excessive computational complexity. recently a new kind of adaptive filters, based on three-level clipping of the input signal has been presented for reduction of their computational complexity. in this paper, a theoretical analysis of the steady-state misalignment of ...