Inflation Targeting and Exchange Rate Rules in an Open Economy:
This paper provides a simple dynamic neo-Keynesian model that can be used to analyze the impact of monetary policy that considers inflation targeting in a small open economy. This economy is characterized by imperfect competition and short-run price rigidity. The main findings of the paper are that,...
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Format: | Elektronisch E-Book |
Sprache: | English |
Veröffentlicht: |
Washington, D.C
International Monetary Fund
2004
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Schriftenreihe: | IMF Working Papers
Working Paper No. 04/21 |
Online-Zugang: | UBW01 UEI01 LCO01 SBR01 UER01 SBG01 UBG01 FAN01 UBT01 FKE01 UBY01 UBA01 FLA01 UBM01 UPA01 UBR01 FHA01 FNU01 BSB01 TUM01 Volltext |
Zusammenfassung: | This paper provides a simple dynamic neo-Keynesian model that can be used to analyze the impact of monetary policy that considers inflation targeting in a small open economy. This economy is characterized by imperfect competition and short-run price rigidity. The main findings of the paper are that, depending on what shocks affect the economy, the effects of inflation targeting on output and inflation volatility depend crucially on the exchange rate regime and the inflation index being targeted. First, in the presence of real shocks, flexible exchange rates dominate managed exchange rates, while for nominal shocks the reverse is true. Second, domestically generated inflation targeting is preferable to CPI inflation targeting, because the former is more stabilizing not only in relation to both measures of inflation, but also to the output gap and the real exchange rate. Finally, flexible inflation targeting outperforms strict inflation targeting in terms of welfare |
Beschreibung: | 1 Online-Ressource (37 p) |
ISBN: | 1451921896 9781451921892 |
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spelling | Parrado, Eric Verfasser aut Inflation Targeting and Exchange Rate Rules in an Open Economy Parrado, Eric Washington, D.C International Monetary Fund 2004 1 Online-Ressource (37 p) txt rdacontent c rdamedia cr rdacarrier IMF Working Papers Working Paper No. 04/21 This paper provides a simple dynamic neo-Keynesian model that can be used to analyze the impact of monetary policy that considers inflation targeting in a small open economy. This economy is characterized by imperfect competition and short-run price rigidity. The main findings of the paper are that, depending on what shocks affect the economy, the effects of inflation targeting on output and inflation volatility depend crucially on the exchange rate regime and the inflation index being targeted. First, in the presence of real shocks, flexible exchange rates dominate managed exchange rates, while for nominal shocks the reverse is true. Second, domestically generated inflation targeting is preferable to CPI inflation targeting, because the former is more stabilizing not only in relation to both measures of inflation, but also to the output gap and the real exchange rate. Finally, flexible inflation targeting outperforms strict inflation targeting in terms of welfare Online-Ausg http://elibrary.imf.org/view/IMF001/03565-9781451921892/03565-9781451921892/03565-9781451921892.xml Verlag URL des Erstveröffentlichers Volltext |
spellingShingle | Parrado, Eric Inflation Targeting and Exchange Rate Rules in an Open Economy |
title | Inflation Targeting and Exchange Rate Rules in an Open Economy |
title_auth | Inflation Targeting and Exchange Rate Rules in an Open Economy |
title_exact_search | Inflation Targeting and Exchange Rate Rules in an Open Economy |
title_exact_search_txtP | Inflation Targeting and Exchange Rate Rules in an Open Economy |
title_full | Inflation Targeting and Exchange Rate Rules in an Open Economy Parrado, Eric |
title_fullStr | Inflation Targeting and Exchange Rate Rules in an Open Economy Parrado, Eric |
title_full_unstemmed | Inflation Targeting and Exchange Rate Rules in an Open Economy Parrado, Eric |
title_short | Inflation Targeting and Exchange Rate Rules in an Open Economy |
title_sort | inflation targeting and exchange rate rules in an open economy |
url | http://elibrary.imf.org/view/IMF001/03565-9781451921892/03565-9781451921892/03565-9781451921892.xml |
work_keys_str_mv | AT parradoeric inflationtargetingandexchangeraterulesinanopeneconomy |