DETERMINING OPTIMAL MONETARY AND CURRENCY POLICIES WITH DSGE MODELING
https://doi.org/10.18384/2310-6646-2019-4-8-18
Abstract
The aim of this paper is to find an instrument to determine an optimal regime for monetary and exchange rate policies in CIS countries. The analysis has shown that the most suitable way to account for idiosyncrasies of a developing country is to build a DSGE-model. Within the framework of this model one can take into consideration such characteristics as financial market imperfections and export of natural resources. The choice of the optimal policy is made by comparing welfare losses under different specifications of the reaction function of the Central Bank. The reasonable approach is to use the second order approximation while making the model. The results of the research could be used in empirical studies to estimate the optimality of exchange rate and monetary policy in CIS countries, as well as in countries with similar characteristics.
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