Timothy Kam

ANATOMIZING INCOMPLETE-MARKETS SMALL OPEN ECONOMIES: POLICY TRADE-OFFS AND EQUILIBRIUM DETERMINACY

Publisher: Cambridge University Press (CUP)

Date: 05-05-2015

DOI: 10.1017/S1365100514000728

Abstract: We propose a simple incomplete-markets small-open-economy model that is amenable to analytical dissection of its policy-relevant mechanisms. In contrast to its complete-markets limit, the equilibrium real exchange rate is irreducible from the incomplete-markets equilibrium. Market incompleteness exacerbates the domestic-inflation and output-gap monetary-policy trade-off in two ways: its steepness and its resulting endogenous cost-push to the trade-off. The latter depends on an equilibrium combination of structural shocks and on agents' beliefs of future events. Thus, in comparison to its complete-markets and closed-economy limits, standard Taylor-type rules are less capable of inducing determinate rational expectations equilibrium in our environment. Despite the larger policy trade-off under incomplete markets, simple policies that also respond to exchange-rate growth are able to manage expectations that drive the endogenous cost-push term. However, policies that respond directly to expectations may turn out to exacerbate the cost-push trade-off further, and thus, to be more likely to fuel self-fulfilling multiple or unstable equilibria.

A Note on Imperfect Credibility

Publisher: Elsevier BV

Date: 2016

DOI: 10.2139/SSRN.2796845

Solving dynamic public insurance games with endogenous agent distributions: Theory and computational approximation

Publisher: Elsevier BV

Date: 05-2016

DOI: 10.1016/J.JMATECO.2016.03.004

Political dynamics, public goods and private spillovers

Publisher: Elsevier BV

Date: 09-2020

DOI: 10.1016/J.JEBO.2020.06.007

Money, capital, and exchange rate fluctuations

Publisher: Wiley

Date: 23-01-2013

DOI: 10.1111/J.1468-2354.2012.00735.X

On weak identification in structural VARMA models

Publisher: Elsevier BV

Date: 07-2017

DOI: 10.1016/J.ECONLET.2017.03.035

On stationary recursive equilibria and nondegenerate state spaces: The Huggett model

Publisher: Elsevier BV

Date: 2014

DOI: 10.1016/J.JMATECO.2013.09.009

Sustainable International Monetary Policy Cooperation

Publisher: Elsevier BV

Date: 2015

DOI: 10.2139/SSRN.2643960

Breaking the Curse of Kareken and Wallace with Private Information

Publisher: Elsevier BV

Date: 2015

DOI: 10.2139/SSRN.2669860

Nominal Exchange Rate Determinacy Under the Threat of Currency Counterfeiting

Publisher: Federal Reserve Bank of St. Louis

Date: 06-2015

DOI: 10.20955/WP.2015.028

Bonds with transactions service and optimal Ramsey policy

Publisher: Elsevier BV

Date: 12-2009

DOI: 10.1016/J.JMACRO.2009.01.006

Nominal Exchange Rate Determinacy under the Threat of Currency Counterfeiting

Publisher: American Economic Association

Date: 04-2017

DOI: 10.1257/MAC.20150172

Abstract: We study the endogenous choice to accept fiat objects as media of exchange and their implications for nominal exchange rate determination. We consider a two-country environment with two currencies that can be used to settle any transactions. However, currencies can be counterfeited at a fixed cost and the decision to counterfeit is private information. This induces equilibrium liquidity constraints on the currencies in circulation. We show that the threat of counterfeiting can pin down the nominal exchange rate even when the currencies are perfect substitutes, thus breaking the famous Kareken-Wallace indeterminacy result. (JEL D82, E42, F31)

Regional economic growth disparities: A political economy perspective

Publisher: Elsevier BV

Date: 2017

DOI: 10.1016/J.EJPOLECO.2016.10.009

Uncovering the hit list for small inflation Targeters: A bayesian structural analysis

Publisher: Wiley

Date: 06-2009

DOI: 10.1111/J.1538-4616.2009.00224.X

Sustainable International Monetary Policy Cooperation

Publisher: Elsevier BV

Date: 2016

DOI: 10.2139/SSRN.2760106

How costly is exchange rate stabilisation for an inflation targeter? The case of Australia

Publisher: Wiley

Date: 09-2008

DOI: 10.1111/J.1475-4932.2008.00496.X

Reviews: Economic Dynamics - Theory and Computation

Publisher: Wiley

Date: 18-08-2010

DOI: 10.1111/J.1475-4932.2010.00669.X

Public capital spillovers and growth revisited: A long-run and dynamic structural analysis

Publisher: Wiley

Date: 09-2008

DOI: 10.1111/J.1475-4932.2008.00498.X

Interest-rate smoothing in a two-sector small open economy

Publisher: Elsevier BV

Date: 06-2007

DOI: 10.1016/J.JMACRO.2005.04.006

Gains from interest-rate smoothing in a small open economy with zero-bound aversion

Publisher: Elsevier BV

Date: 03-2009

DOI: 10.1016/J.NAJEF.2009.01.001

Australian National University

Location: Australia

View Organisation

University Of Western Australia

Location: Australia

View Organisation

University Of Melbourne

Location: Australia

View Organisation

Discovery Projects - Grant ID: DP180103680

Start Date: 03-2018

End Date: 12-2023

Amount: $194,442.00

Funder: Australian Research Council

Discovery Projects - Grant ID: DP0984399

Start Date: 2009

End Date: 12-2013

Amount: $387,943.00

Funder: Australian Research Council

Discovery Projects - Grant ID: DP210101688

Start Date: 06-2021

End Date: 06-2025

Amount: $287,304.00

Funder: Australian Research Council