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MONETARY POLICY RULES AND MACROECONOMIC STABILIZATION IN SMALL OPEN ECONOMIES UNDER BEHAVIORAL FX TRADING: INSIGHTS FROM NUMERICAL SIMULATIONS *
Author(s) -
PROAÑO CHRISTIAN R.
Publication year - 2013
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2012.02308.x
Subject(s) - economics , foreign exchange , monetary policy , small open economy , stability (learning theory) , set (abstract data type) , macroeconomic model , macroeconomics , open economy , stabilization policy , monetary economics , economy , exchange rate , computer science , machine learning , programming language
In this paper the interaction between foreign exchange (FX) markets driven by trading based on behavioral forecasting rules and the macroeconomy of a small open economy is investigated. A special focus of the paper is set on the consequences of chartism or technical analysis for the stability at the macroeconomic level. Furthermore, the performance of alternative monetary policy rules concerning the overall stabilization of the economy is investigated through numerical analysis.