Monetary independence in small open economies : The Case of Ireland and Finland

This paper investigates the degree of the independence of monetary policy in Ireland and in Finland using the Kouri-Porter framework. After theoretical considerations on the monetary approach, the portfolio balance approach and the Kouri-Porter model the institutional policy framework in both countries is presented. The empirical part of the study summarizes existing estimation results for Finland and presents some work of our own for Ireland. It is found that there is about similar scope for independent monetary policy in Ireland after joining the European Monetary System in 1979 as in Finland.