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Original scientific paper

https://doi.org/10.1080/1331677X.2021.2020672

External shocks in a small open economy: an evaluation of monetary policy rules

Xin Xu
Xiaoguang Xu


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Abstract

This paper evaluates several small open economy DSGE models
and the impact of external shock spillovers on small open economies. We investigate five small economies (the UK, Australia,
Canada, New Zealand and Taiwan) and find that the welfare consequences vary depending on key domestic economic variables,
and the best interest-rate rule varies across models. Then we
examine the performances of the four types of models, a
preferred result has been found in a model which considers the
country risk premium, as the best rule could be obtained as long
as the selected parameters are calibrated for particular economies.

Keywords

Small open economy; monetary policy rules; external shocks

Hrčak ID:

302785

URI

https://hrcak.srce.hr/302785

Publication date:

31.3.2023.

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