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Macroeconomic Stability: Transition Towards The Nominal Exchange Rate Stability

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Executive Summary

The novelty of this paper is in the presentation of a theoretical frame work that allows the modeling of an announced switch of the monetary regime. In the authors' experiment, the monetary authority announces stabilization of the nominal exchange rate after the announced number of periods. They analyze the effects of the monetary policy regime for the macroeconomic stability over the transition period. For their analysis, they consider representative forms of standard monetary regimes. Moreover, they rank the examined regimes in terms of loss functions.

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