Risk premium shocks, monetary policy and exchange rate pass-through in small, open countries
Bibliographic record
Abstract
The central banks of small, open countries often face the problem that the exchange rate of their currency appreciates or depreciates in response to impacts of external origin. Since, over time, these fluctuations are also reflected in consumer prices, inflation may depart from the optimal level. In my paper I study the way in which monetary policy and consumer prices respond to exchange rate fluctuations of external origin in the Czech Republic, the United Kingdom, Canada, Poland, Hungary and Sweden. Based on my estimates, I conclude that under normal circumstances a temporarily more aggressive interest policy alone does not help cushion shocks, and that the sensitivity of domestic prices to the exchange rate is similar in these countries irrespective of the interest rate policy they adopt. By contrast, price stability and the fact that inflation expectations are firmly anchored may reduce exchange rate pass-through considerably, which, in terms of inflation, offers better protection against external shocks. However, the results are not valid under circumstances where the central bank is experiencing severe market disturbances or panicky behaviour; firm interest measures in these cases may be appropriate and serve the intended purpose.
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.000 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.000 |
| Bibliometrics | 0.000 | 0.000 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.001 |
| Open science | 0.001 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.002 | 0.001 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; both teacher heads agree on what is shown here.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".