Monetary Policy and Natural Disasters: An Extension and Simulation Analysis in the Framework of New Keynesian Macroeconomic Model

Abstract

In this paper, we show that how monetary policy should respond in the aftermath of a rare but large-scale natural disaster such as typhoons and earthquakes, using simulation analysis from the view of New Keynesian perspective. Since the conditions for the simulation is different from previous studies, monetary tightening for inflation stabilization does not necessarily have better performance in the aftermath of a disaster shock.

Publication
Asia Pacific Institute of Research (APIR)