Two impediments to effective monetary policy operation include illiquidity in bond markets and the zero bound of interest rates. Under these conditions alternative means of enacting monetary policy may be required. This paper empirically explores policy options implemented through equity and currency markets that will generate similar inflation responses at different time horizons. In terms of GDP loss the least costly means of achieving a particular long run inflation outcome is via the current monetary policy arrangements. Currency market alternatives are volatile but less expensive than the equity market in terms of output loss for short term inflation horizons. © Springer Science+Business Media, LLC 2007.

Item Type:	Refereed Article
Research Division:	Economics
Research Group:	Applied economics
Research Field:	Financial economics
Objective Division:	Economic Framework
Objective Group:	Macroeconomics
Objective Field:	Monetary policy
UTAS Author:	Dungey, MH (Professor Mardi Dungey)
ID Code:	56985
Year Published:	2008
Web of Science® Times Cited:	4
Deposited By:	Economics and Finance
Deposited On:	2009-06-11
Last Modified:	2015-09-01
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