Stabilization policies in open economies with imperfect current information

In an open economy with perfect capital mobility the exchange rate and the interest rate may convey different information about current shocks. In a model with one-period wage contracts we explore the information content of the financial signals along with the optimal stabilization policy and how the two may be related. Some self-fulfilling properties of the information structure are encountered, and it is shown that the market clearing level of outputs is generally obtainable while full information output may only be obtained in special cases, where it is a necessary condition that the agents believe the signals are informationally different.