Essays on Monetary Policy

This thesis deals with topics related to monetary policy in general. The dissertation consists of three chapters. The first chapter focuses on the role of monetary policy in resource-rich developing countries from a theoretical perspective. The second chapter empirically analyses the determinants of the choice of exchange rate regime in resource- rich countries. The third chapter studies the monetary transmission channels in the Czech Republic by using micro-level data. In the first chapter we construct a DSGE model for a small, open economy to show that if fiscal indiscipline, in the form of immediate responses to foreign resource revenue changes is inevitable, then monetary policy can help improve the allocation problem. The simulation results indicate that targeting the exchange rate or price level, through foreign exchange interventions by the central bank, can soften the negative effects of Dutch Disease and stabilize the economy in the face of volatile natural resource revenues in the short run. We also find that a fixed exchange rate regime outperforms price level targeting by delivering higher isolation and hence less vulnerability to shocks in natural resource revenues. In contrast, if the central bank chooses to pursue a laissez faire policy, i.e., not to intervene, then the economy becomes..