RDP 2009-01: Currency Misalignments and Optimal Monetary Policy: A Re-examination
Equation (B39)
1
−
σ
2
(
c
˜
t
2
+
c
˜
t
∗
2
)
−
1
+
ϕ
2
(
n
˜
t
2
+
n
˜
t
∗
2
)
+
(
1
−
σ
)
(
c
¯
t
c
˜
t
+
c
¯
t
∗
c
˜
t
∗
)
−
(
1
+
ϕ
)
(
n
¯
t
n
˜
t
+
n
¯
t
∗
n
˜
t
∗
)
=
(
1
−
σ
2
)
(
2
c
y
2
−
2
c
y
+
1
)
(
y
˜
t
2
+
y
˜
t
∗
2
)
−
(
1
−
σ
)
(
2
c
y
2
−
2
c
y
)
y
˜
t
y
˜
t
∗
−
(
1
+
ϕ
2
)
(
y
˜
t
2
+
y
˜
t
∗
2
)
+
(
1
−
σ
)
(
2
(
c
y
2
−
c
y
)
−
(
ν
−
1
)
c
y
+
ν
2
)
(
y
¯
t
−
y
¯
t
∗
)
(
y
˜
t
−
y
˜
t
∗
)
+
(
1
−
σ
)
ν
2
(
2
−
ν
)
2
4
D
2
Δ
t
2
+
(
1
−
σ
)
ν
(
2
−
ν
)
(
ν
−
1
)
2
D
2
Δ
t
(
y
t
−
y
t
∗
)
+
o
(
‖
a
2
‖
)
.
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