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UID:cd2859cf971a6576c4a653feaaf3c3a6
CATEGORIES:Seminars
CREATED:20170418T183042
SUMMARY:Lunch Seminar: Fabrizio Perri - Federal Reserve Bank of Minneapolis
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:Exchange Rate Policies at the Zero Lower Bound (with Manuel Amador, Javier 
 Bianchi and Luigi Bocola)\nAbstract:\n This paper studies how the Central B
 ank of a small open economy achieves an exchange rate objective in an envir
 onment that features a zero lower bound (ZLB) constraint on nominal interes
 t rates and limits to arbitrage in international capital markets. If the no
 minal interest rate that is consistent with interest parity is positive, th
 e Central Bank can achieve its exchange rate objectives at the cost of losi
 ng its monetary independence, a well know result in international finance. 
 However, if the nominal interest rate consistent with interest rate parity 
 is negative, the pursue of an exchange rate objective necessarily results i
 n zero nominal interest rates, deviations from interest rate parity, capita
 l inflows, and welfare costs associated to the accumulation of foreign rese
 rves by the Central Bank. In this ZLB environment, reductions in the foreig
 n interest rates, increases in financial integration and expectational mist
 akes by private agents unambiguously reduce welfare, the opposite of what h
 appens when interest rates are positive. Negative nominal interest rates he
 lp the Central Bank by restoring interest rate parity and hindering the cap
 ital flows. Our framework also provides a simple tool to measure the losses
  by Central Banks that have accumulated large amounts of foreign reserves w
 hile pursuing exchange rate policies.\n
DTSTAMP:20260406T181113Z
DTSTART:20160725T130000Z
DTEND:20160725T140000Z
SEQUENCE:0
TRANSP:OPAQUE
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