The Effects Of Capital Market Openness On Exchange Rate Pass Through And Welfare In An Inflation Targeting Small Open Economy

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The Effects Of Capital Market Openness On Exchange Rate Pass Through And Welfare In An Inflation Targeting Small Open Economy

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Author : Sanchita Mukherjee
language : en
Publisher:
Release Date : 2010

The Effects Of Capital Market Openness On Exchange Rate Pass Through And Welfare In An Inflation Targeting Small Open Economy written by Sanchita Mukherjee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.

Inflation Targeting And Capital Openness In The Small Open Economy

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Author : Sanchita Mukherjee
language : en
Publisher:
Release Date : 2011

Inflation Targeting And Capital Openness In The Small Open Economy written by Sanchita Mukherjee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.

Macroeconomic Implications Of The Transition To Inflation Targeting And Capital Account Liberalization In Romania

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Author : Nikolay Gueorguiev
language : en
Publisher: International Monetary Fund
Release Date : 2004-12-01

Macroeconomic Implications Of The Transition To Inflation Targeting And Capital Account Liberalization In Romania written by Nikolay Gueorguiev 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 2004-12-01 with Business & Economics categories.

In the near future, Romania will introduce inflation targeting and fully liberalize its capital account. This paper aims to analyze, in a dynamic general-equilibrium model with sticky prices and monopolistic competition, how these two profound changes will affect the ability of monetary policy to pursue its objective of price stability. In particular, the resilience of the current and future monetary policy regimes to shocks is evaluated against two welfare criteria: a standard central bank loss function containing the deviations of inflation, output, and the real exchange rate from their equilibrium values, and the compensating variation measure of Lucas (1987).

Inflation Targeting And Exchange Rate Rules In An Open Economy

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Author : Mr.Eric Parrado
language : en
Publisher: INTERNATIONAL MONETARY FUND
Release Date : 2004-02-01

Inflation Targeting And Exchange Rate Rules In An Open Economy written by Mr.Eric Parrado 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 2004-02-01 with Business & Economics categories.

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

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Author : Mr.Marco Airaudo
language : en
Publisher: International Monetary Fund
Release Date : 2016-03-08

Inflation Targeting And Exchange Rate Management In Less Developed Countries written by Mr.Marco Airaudo 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 2016-03-08 with Business & Economics categories.

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.

Inflation Targeting Lite In Small Open Economies

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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 2005-09-01

Inflation Targeting Lite In Small Open Economies written by International Monetary Fund 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 2005-09-01 with Business & Economics categories.

This paper develops a new macrofinance model for small open economies, allowing the investigation of Mauritius''s experience with ''inflation targeting lite'' as described in Stone (2003). It finds that this monetary policy regime has been associated with a general reduction in inflation, principally through a reduction in inflation expectations. The credibility the Bank of Mauritius has established with its ''inflation targeting lite'' regime has allowed it to shift from an emphasis on exchange rate targeting towards inflation targeting. By estimating a model in which the yield curve is modeled explicitly we are able to obtain estimates of inflation expectations.

Macroeconomic Implications Of The Transition To Inflation Targeting And Capital Account Liberalization In Romania

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Author : Pelin Berkmen
language : en
Publisher:
Release Date : 2004

Macroeconomic Implications Of The Transition To Inflation Targeting And Capital Account Liberalization In Romania written by Pelin Berkmen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Anti-inflationary policies categories.

In the near future, Romania will introduce inflation targeting and fully liberalize its capital account. This paper aims to analyze, in a dynamic general-equilibrium model with sticky prices and monpolistic competition, how these two profound changes will affect the ability of monetary policy to pursue its objective of price stability. In particular, the resilience of the current and future monetary policy regimes to shocks is evaluated against two welfare criteria: a standard central bank loss function containing the deviations of inflation, output, and the real exchange rate from their equilibrium values, and the compensating variation measure of Lucas (1987).

The Role Of The Exchange Rate In Inflation

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Author : Anna Nordstrom
language : en
Publisher: International Monetary Fund
Release Date : 2009-11-23

The Role Of The Exchange Rate In Inflation written by Anna Nordstrom 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 2009-11-23 with Business & Economics categories.

This paper explores the role of exchange rates in emerging economies with inflation-targeting regimes, an issue that has become especially germane during the current episode of financial turmoil and volatile capital flows. Under inflation targeting, the interest rate is the main monetary policy tool for influencing activity and inflation, and there is little agreement about the appropriate role of the exchange rate.The exchange rate is a more important monetary policy tool for emerging economies that have adopted inflation targeting than it is for inflation-targeting advanced economies. Inflation-targeting emerging economies generally have less flexible exchange rate arrangements and intervene more frequently in the foreign exchange market than their advanced economy counterparts. The enhanced role of the exchange rate reflects these economies' greater vulnerability to exchange rate shocks and their less developed financial markets. However, their sharper focus on the exchange rate may cause some confusion about the commitment of their central banks to achieve the inflation target and may also complicate policy implementation. Global inflation pressures, greater exchange rate volatility, and the financial stresses from the global financial turmoil that began in mid-2007 are heightening these tensions.

Monetary Policy And Exchange Rate Volatility In A Small Open Economy

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Author : Jordi Galí
language : en
Publisher:
Release Date : 2002

Monetary Policy And Exchange Rate Volatility In A Small Open Economy written by Jordi Galí and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with Anti-inflationary policies categories.

We lay out a small open economy version of the Calvo sticky price model, and show how the equilibrium dynamics can be reduced to a tractable canonical system in domestic inflation and the output gap. We employ this framework to analyze the macroeconomic implications of three alternative monetary policy regimes for the small open economy: domestic inflation targeting, CPI targeting and an exchange rate peg. We show that a key difference among these regimes lies in the relative amount of exchange rate volatility that they entail. We also discuss a special case for which domestic inflation targeting constitutes the optimal policy, and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with suboptimal regimes.

Welfare Effects Of Transparency In Foreign Exchange Markets

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Author : Burkhard Drees
language : en
Publisher: International Monetary Fund
Release Date : 2002-12

Welfare Effects Of Transparency In Foreign Exchange Markets written by Burkhard Drees 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 2002-12 with Business & Economics categories.

This paper studies the impact of enhanced transparency on risk sharing opportunities in the foreign exchange market and the associated implications for ex ante welfare. Transparency is measured in this model by the informational content of publicly observable signals about exchange rate developments. We find that in this model more transparency improves welfare in economies that are poorly endowed with capital and/or where investors are not very risk-averse, while welfare is reduced in economies with large capital endowments and/or where investors are highly risk-averse.