Monetary And Fiscal Rules In An Emerging Small Open Economy
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Monetary And Fiscal Rules In An Emerging Small Open Economy
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Author : Nicoletta Batini
language : en
Publisher:
Release Date : 2009
Monetary And Fiscal Rules In An Emerging Small Open Economy written by Nicoletta Batini and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with Fiscal policy categories.
We develop a optimal rules-based interpretation of the 'three pillars macroeconomic policy framework': a combination of a freely floating exchange rate, an explicit target for inflation, and a mechanism than ensures a stable government debt-GDP ratio around a specified long run. We show how such monetary-fiscal rules need to be adjusted to accommodate specific features of emerging market economies. The model takes the form of two-blocs, a DSGE emerging small open economy interacting with the rest of the world and features, in particular, financial frictions It is calibrated using Chile and US data. Alongside the optimal Ramsey policy benchmark, we model the three pillars as simple monetary and fiscal rules including and both domestic and CPI inflation targeting interest rate rules alongside a 'Structural Surplus Fiscal Rule' as followed recently in Chile. A comparison with a fixed exchange rate regime is made. We find that domestic inflation targeting is superior to partially or implicitly (through a CPI inflation target) or fully attempting to stabilizing the exchange rate. Financial frictions require fiscal policy to play a bigger role and lead to an increase in the costs associated with simple rules as opposed to the fully optimal policy.
Imf Working Papers
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Author : Nicoletta Batini
language : en
Publisher:
Release Date : 2009
Imf Working Papers written by Nicoletta Batini and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with Electronic books categories.
Open Economy Macroeconomics In Developing Countries
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Author : Carlos A. Vegh
language : en
Publisher: MIT Press
Release Date : 2013-08-30
Open Economy Macroeconomics In Developing Countries written by Carlos A. Vegh and has been published by MIT Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-08-30 with Business & Economics categories.
A comprehensive and rigorous text that shows how a basic open economy model can be extended to answer important macroeconomic questions that arise in emerging markets. This rigorous and comprehensive textbook develops a basic small open economy model and shows how it can be extended to answer many important macroeconomic questions that arise in emerging markets and developing economies, particularly those regarding monetary, fiscal, and exchange rate issues. Eschewing the complex calibrated models on which the field of international finance increasingly relies, the book teaches the reader how to think in terms of simple models and grasp the fundamentals of open economy macroeconomics. After analyzing the standard intertemporal small open economy model, the book introduces frictions such as imperfect capital markets, intertemporal distortions, and nontradable goods, into the basic model in order to shed light on the economy's response to different shocks. The book then introduces money into the model to analyze the real effects of monetary and exchange rate policy. It then applies these theoretical tools to a variety of important macroeconomic issues relevant to developing countries (and, in a world of continuing financial crisis, to industrial countries as well), including the use of a nominal interest rate as a main policy instrument, the relative merits of flexible and predetermined exchange rate regimes, and the targeting of “real anchors.” Finally, the book analyzes in detail specific topics such as inflation stabilization, “dollarization,” balance of payments crises, and, inspired by recent events, financial crises. Each chapter includes boxes with relevant empirical evidence and ends with exercises. The book is suitable for use in graduate courses in development economics, international finance, and macroeconomics.
The Fiscal Multiplier In Small Open Economy
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Author : Jasmin Sin
language : en
Publisher: International Monetary Fund
Release Date : 2016-09-07
The Fiscal Multiplier In Small Open Economy written by Jasmin Sin and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-09-07 with Business & Economics categories.
This paper studies the fiscal multiplier using a small-open-economy DSGE model enriched with financial frictions. It shows that the multiplier is large when frictions are present in domestic and international financial markets. The reason is that in the model government bonds are more liquid than private financial assets and that entrepreneurs face liquidity constraints. A bond-financed fiscal expansion eases these constraints and stimulates investment and hence growth. This mechanism, however, breaks down under the assumption of perfect international capital mobility, suggesting that conventional models which ignore the presence of frictions in international capital markets tend to underestimate the fiscal multiplier.
On The Use Of Monetary And Macroprudential Policies For Small Open Economies
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Author : Mr.F. Gulcin Ozkan
language : en
Publisher: International Monetary Fund
Release Date : 2014-06-24
On The Use Of Monetary And Macroprudential Policies For Small Open Economies written by Mr.F. Gulcin Ozkan and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-06-24 with Business & Economics categories.
We explore optimal monetary and macroprudential policy rules for a small open economy. Delegating 'lean against the wind' squarely to macroprudential policy provides a more robust policy mix to shock uncertainty—(i) if macroprudential measures exist, there are no significant welfare gains from monetary policy reacting to credit growth under a financial shock; and (ii) monetary responses to financial markets could generate bigger welfare losses than macroprudential responses under different shocks. The source of outstanding liabilities also plays a role in the choice of policy instrument— macroprudential policies are particularly effective for emerging markets where foreign borrowing is sizeable.
Monetary Rules For Small Open Emerging Economies
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Author : Douglas Laxton
language : en
Publisher:
Release Date : 2003
Monetary Rules For Small Open Emerging Economies written by Douglas Laxton and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with Country risk categories.
This paper develops a variant of the IMF's Global Economic Model (GEM) suitable to analyze macroeconomic dynamics in open economies, and uses it to assess the effectiveness of Taylor rules and Inflation-Forecast-Based (IFB) rules in stabilizing variability in output and inflation. Our findings suggest that a simple IFB rule that does not rely upon any direct estimates of the equilibrium real interest rate and places a relatively high weight on the inflation forecast may perform better in small open economies than conventional Taylor rules.
Monetary And Fiscal Coordination In Small Open Economies
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Author : DeLisle Worrell
language : en
Publisher: International Monetary Fund
Release Date : 2000-03
Monetary And Fiscal Coordination In Small Open Economies written by DeLisle Worrell and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000-03 with Business & Economics categories.
This paper is concerned with the design of institutional arrangements for low inflation in small open economies. In the real world of information asymmetries, uncertain expectations and changeable preferences, it is not enough to create an autonomous and publicly accountable central bank. In addition, the central bank and the treasury must work together on the design, implementation, monitoring and, when necessary, the revision of macroeconomic policy, and on providing the public with information on ongoing economic developments and interpretation of the macroeconomic strategy.
Fiscal Consolidation In An Open Economy
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Author : Christopher J. Erceg
language : en
Publisher:
Release Date : 2012
Fiscal Consolidation In An Open Economy written by Christopher J. Erceg and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with Fiscal policy categories.
Monetary Policy Transmission In An Emerging Market Setting
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Author : Ila Patnaik
language : en
Publisher: International Monetary Fund
Release Date : 2011-01-01
Monetary Policy Transmission In An Emerging Market Setting written by Ila Patnaik and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-01-01 with Business & Economics categories.
Some emerging economies have a relatively ineffective monetary policy transmission owing to weaknesses in the domestic financial system and the presence of a large and segmented informal sector. At the same time, small open economies can have a substantial monetary policy transmission through the exchange rate channel. In order to understand this setting, we explore a unified treatment of monetary policy transmission and exchangerate pass-through. The results for an emerging market, India, suggest that the most effective mechanism through which monetary policy impacts inflation runs through the exchange rate.
A New Open Economy Macro Model For Fiscal Policy Evaluation
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Author : Dennis P. J. Botman
language : en
Publisher: INTERNATIONAL MONETARY FUND
Release Date : 2006-02-01
A New Open Economy Macro Model For Fiscal Policy Evaluation written by Dennis P. J. Botman and has been published by INTERNATIONAL MONETARY FUND this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006-02-01 with categories.
We develop a New-Open-Economy-Macro model in which Ricardian equivalence does not hold because of (i) distortionary labor and corporate income taxation; (ii) limited asset market participation; and (iii) because the overlapping-generations structure results in a disconnect between current and future generations. We consider a permanent increase in government debt following a cut in labor or corporate income taxes in a small and large open economy. We analyze the sensitivity of the results to the key structural parameters of the model and argue that under plausible assumptions there will be significant crowding-out effects associated with permanent increases in government debt.