Almost all SEACEN member economies are prime examples of small open economies, i.e., while they actively participate in international trade as well as the international monetary and financial system, they are too small compared to the rest of the world such that their policies do not affect world prices, world interest rates or incomes. This makes small open economies price takers in their interactions with the rest of the world. Economic policymaking in small open economies therefore is quite different from the textbook world. This course explores many of the issues that arise from being a small open economy internationally and highlights policy challenges for such countries.
At the end of the course, participants will be able to: (1) identify the constraints and implications on monetary and financial stability policies faced by central banks in small open economies; (2) evaluate optimal monetary and macroprudential policies; (3) assess appropriate nominal targets and exchange-rate regimes; and (4) gauge the interaction and coordination between monetary and financial stability.
This course is intended for middle-level officers/technical staff of central banks with at least two years of experience in monetary and financial policy analysis. A strong background in macroeconomic theory and monetary policy is an advantage.
- Inflation, inflation expectations, central bank independence, credibility and stabilisation
- Nominal targets for monetary policy
- Monetary policy rules for small-open economies
- Exchange-rate regimes, macroeconomic performance of various regimes, including dollarisation
- Interaction and coordination of monetary policy and financial stability
- Identification of financial stability risks in small-open economies with an emphasis on quantitative models suitable for small-open economies
- Optimal macroprudential policies for small-open economies, including evidence from DSGE models