Abstract

This thesis treats issues of monetary policy cooperation and the performance of simple monetary policy rules. More specifically, I perform an extensive search through different types of simple optimized monetary policy rules and central bank's targets in order to see how gains from cooperation depend on these policies. In this context, this thesis discusses the merits of using optimal Taylor rule that responds to fluctuations of exchange rate in stabilizing inflation and output gap. For this, a two-country general equilibrium model is used to see how different monetary policy rules perform under different shock's type. Lastly, the robustness of simple monetary policy rules under output gap uncertainty is tested

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