Exchange Rate Effects and Inflation Targeting in a Small Open Economy - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Exchange Rate Effects and Inflation Targeting in a Small Open Economy write by Reserve Bank of New Zealand. This book was released on 1999. Exchange Rate Effects and Inflation Targeting in a Small Open Economy available in PDF, EPUB and Kindle.
Exchange Rate Effects and Inflation Targeting in a Small Open Economy
Exchange Rate Effects and Inflation Targeting in a Small Open Economy - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Exchange Rate Effects and Inflation Targeting in a Small Open Economy write by Ben Hunt. This book was released on 2005. Exchange Rate Effects and Inflation Targeting in a Small Open Economy available in PDF, EPUB and Kindle. In this paper, stochastic simulations of the Reserve Bank of New Zealand's new macroeconomic model, FPS, are used to examine the issue of which price index monetary policy should stabilise in a small open economy. Under the class of policy rules considered, targeting a measure of domestic inflation, which does not include the direct effects of exchange rate movements on the price of imported goods, results in lower variability in real output, nominal interest rates, the exchange rate and domestic price inflation. The result is robust if direct exchange rate effects influence agents' expectations of generalised inflation and if the policy maker is uncertain about how direct exchange rate effects influence expectations. Tracing out efficient policy frontiers under the two alternative targets illustrates that for a given level of CPI variability, output variability can be significantly reduced by targeting domestic price inflation.
Inflation Targeting and Exchange Rate Rules in an Open Economy
Inflation Targeting and Exchange Rate Rules in an Open Economy - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Inflation Targeting and Exchange Rate Rules in an Open Economy write by Mr.Eric Parrado. This book was released on 2004-02-01. Inflation Targeting and Exchange Rate Rules in an Open Economy available in PDF, EPUB and Kindle. 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.
Inflation Targeting and Exchange Rate Management In Less Developed Countries
Inflation Targeting and Exchange Rate Management In Less Developed Countries - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Inflation Targeting and Exchange Rate Management In Less Developed Countries write by Mr.Marco Airaudo. This book was released on 2016-03-08. Inflation Targeting and Exchange Rate Management In Less Developed Countries available in PDF, EPUB and Kindle. We analyze coordination of monetary and exchange rate policy in a two-sector model of a small open economy featuring imperfect substitution between domestic and foreign financial assets. Our central finding is that management of the exchange rate greatly enhances the efficacy of inflation targeting. In a flexible exchange rate system, inflation targeting incurs a high risk of indeterminacy where macroeconomic fluctuations can be driven by self-fulfilling expectations. Moreover, small inflation shocks may escalate into much larger increases in inflation ex post. Both problems disappear when the central bank leans heavily against the wind in a managed float.
Hybrid Inflation Targeting Regimes
Hybrid Inflation Targeting Regimes - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Hybrid Inflation Targeting Regimes write by Jorge Restrepo. This book was released on 2009-10-01. Hybrid Inflation Targeting Regimes available in PDF, EPUB and Kindle. This paper uses a DSGE model to examine whether including the exchange rate explicitly in the central bank's policy reaction function can improve macroeconomic performance. It is found that including an element of exchange rate smoothing in the policy reaction function is helpful both for financially robust advanced economies and for financially vulnerable emerging economies in handling risk premium shocks. As long as the weight placed on exchange rate smoothing is relatively small, the effects on inflation and output volatility in the event of demand and cost-push shocks are minimal. Financially vulnerable emerging economies are especially likely to benefit from some exhange rate smoothing because of the perverse impact of exchange rate movements on activity.
