RDP 2009-01: Currency Misalignments and Optimal Monetary Policy: A Re-examination
Equation (B34)
υ
t
−
υ
t
max
=
[
Ω
+
(
1
−
σ
)
(
c
y
2
−
c
y
)
]
(
y
˜
t
−
y
˜
t
∗
)
2
−
(
σ
+
ϕ
2
)
(
y
˜
t
2
+
y
t
∗
2
)
−
ξ
2
(
σ
p
t
2
+
σ
p
∗
t
2
)
+
2
Ω
(
y
¯
t
−
y
¯
t
∗
)
(
y
˜
t
−
y
˜
t
∗
)
+
(
1
−
σ
)
(
2
(
c
y
2
−
c
y
)
−
(
ν
−
1
)
c
y
+
ν
2
)
(
y
¯
t
−
y
¯
t
∗
)
(
y
˜
t
−
y
˜
t
∗
)
+
o
(
‖
a
3
‖
)
.
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