Abstract
Abstract In Part II monetary policy was presented from the perspective of a closed economy. This final part of the book will show that in general it is useful for large currency areas (e.g. the United States, the euro area, Japan) to adopt such a closed-economy perspective for their overall monetary policy strategy. This implies above all that the short-term interest rate is determined only by domestic considerations, e.g. according to a Taylor rule. However, as the example of Japan has shown (Section 9.5), even for such large currency areas it is neither necessary nor advisable to adopt a policy of‘benign neglect’ vis-d-vis the exchange rate.
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