Interest rate rules, inflation stabilization, and imperfect credibility: the small open economy case
The paper examines the robustness of Interest Rate Rules, IRRs, in the context of an imperfectly credible stabilization program, closely following the format of much of the literature in open-economy models, e.g., Calvo and Végh (1993 and 1999). A basic result is that IRRs, like Exchange Rate Based...
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| Main Author: | |
|---|---|
| Format: | Book |
| Language: | English |
| Published: |
Cambridge, Mass.
National Bureau of Economic Research
2007
|
| Series: | Working paper series / National Bureau of Economic Research
13177 |
| Online Access: | Volltext |
| Summary: | The paper examines the robustness of Interest Rate Rules, IRRs, in the context of an imperfectly credible stabilization program, closely following the format of much of the literature in open-economy models, e.g., Calvo and Végh (1993 and 1999). A basic result is that IRRs, like Exchange Rate Based Stabilization, ERBS, programs, could give rise to macroeconomic distortion, e.g., underutilization of capacity and real exchange rate misalignment. However, while under imperfect credibility EBRS is associated with overheating and current account deficits, IRRs give rise to somewhat opposite results. Moreover, the paper shows that popular policies to counteract misalignment, like Strategic Foreign Exchange Market Intervention or Controls on International Capital Mobility may not be effective or could even become counterproductive. The bottom line is that the greater exchange rate flexibility granted by IRRs is by far not a sure shot against the macroeconomic costs infringed by imperfect credibility. |
| Item Description: | Literaturverz. S. 26 - 27 |
| Physical Description: | 27 S. graph. Darst. 22 cm |
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| 520 | 8 | |a The paper examines the robustness of Interest Rate Rules, IRRs, in the context of an imperfectly credible stabilization program, closely following the format of much of the literature in open-economy models, e.g., Calvo and Végh (1993 and 1999). A basic result is that IRRs, like Exchange Rate Based Stabilization, ERBS, programs, could give rise to macroeconomic distortion, e.g., underutilization of capacity and real exchange rate misalignment. However, while under imperfect credibility EBRS is associated with overheating and current account deficits, IRRs give rise to somewhat opposite results. Moreover, the paper shows that popular policies to counteract misalignment, like Strategic Foreign Exchange Market Intervention or Controls on International Capital Mobility may not be effective or could even become counterproductive. The bottom line is that the greater exchange rate flexibility granted by IRRs is by far not a sure shot against the macroeconomic costs infringed by imperfect credibility. | |
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| spelling | Calvo, Guillermo 1941- Verfasser (DE-588)124774679 aut Interest rate rules, inflation stabilization, and imperfect credibility the small open economy case Guillermo A. Calvo Cambridge, Mass. National Bureau of Economic Research 2007 27 S. graph. Darst. 22 cm txt rdacontent n rdamedia nc rdacarrier Working paper series / National Bureau of Economic Research 13177 Literaturverz. S. 26 - 27 The paper examines the robustness of Interest Rate Rules, IRRs, in the context of an imperfectly credible stabilization program, closely following the format of much of the literature in open-economy models, e.g., Calvo and Végh (1993 and 1999). A basic result is that IRRs, like Exchange Rate Based Stabilization, ERBS, programs, could give rise to macroeconomic distortion, e.g., underutilization of capacity and real exchange rate misalignment. However, while under imperfect credibility EBRS is associated with overheating and current account deficits, IRRs give rise to somewhat opposite results. Moreover, the paper shows that popular policies to counteract misalignment, like Strategic Foreign Exchange Market Intervention or Controls on International Capital Mobility may not be effective or could even become counterproductive. The bottom line is that the greater exchange rate flexibility granted by IRRs is by far not a sure shot against the macroeconomic costs infringed by imperfect credibility. Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.> NBER working paper series 13177 (DE-604)BV002801238 13177 http://papers.nber.org/papers/w13177.pdf kostenfrei Volltext |
| spellingShingle | Calvo, Guillermo 1941- Interest rate rules, inflation stabilization, and imperfect credibility the small open economy case |
| title | Interest rate rules, inflation stabilization, and imperfect credibility the small open economy case |
| title_auth | Interest rate rules, inflation stabilization, and imperfect credibility the small open economy case |
| title_exact_search | Interest rate rules, inflation stabilization, and imperfect credibility the small open economy case |
| title_exact_search_txtP | Interest rate rules, inflation stabilization, and imperfect credibility the small open economy case |
| title_full | Interest rate rules, inflation stabilization, and imperfect credibility the small open economy case Guillermo A. Calvo |
| title_fullStr | Interest rate rules, inflation stabilization, and imperfect credibility the small open economy case Guillermo A. Calvo |
| title_full_unstemmed | Interest rate rules, inflation stabilization, and imperfect credibility the small open economy case Guillermo A. Calvo |
| title_short | Interest rate rules, inflation stabilization, and imperfect credibility |
| title_sort | interest rate rules inflation stabilization and imperfect credibility the small open economy case |
| title_sub | the small open economy case |
| url | http://papers.nber.org/papers/w13177.pdf |
| volume_link | (DE-604)BV002801238 |
| work_keys_str_mv | AT calvoguillermo interestraterulesinflationstabilizationandimperfectcredibilitythesmallopeneconomycase |