Monetary, Fiscal, and the Exchange rate Policy Interactions with Central Bank Debt

Some central banks issue interest-bearing debts because of policy considerations other than typical monetary policy. This paper tries to explore implications of mone-tary, \u85 scal, and the foreign exchange rate policy interactions with i) central bank debt, and ii) central bank budget autonomy in a small open economy. The results show that the exchange rate policy is not constrained by the monetary and \u85scal policy in most cases. Also, the amount of central bank debt and the degree of central bank budget autonomy do not a¤ect the price determinations, but have implications on how much adjustment of the passive policy should be for each authority. In addition, the model predicts that the sterilized foreign exchange intervention can be e¤ective even when the central bank is an ination targeter