| Description |
1 online resource (65 pages) : illustrations |
| Series |
IMF Working Paper, 1018-5941 ; WP/16/55 |
|
IMF working paper ; WP/16/55.
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| Summary |
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.--Abstract |
| Notes |
"Research Department, Strategy, Policy, and Review Department, and Institute for Capacity Development." |
|
"March 2016." |
| Bibliography |
Includes bibliographical references (pages 57-64) |
| Notes |
Online resource; title from pdf title page (IMF.org Web site, viewed March 14, 2016) |
| Subject |
Monetary policy -- Developing countries -- Econometric models
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Foreign exchange rates -- Developing countries -- Econometric models
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Inflation targeting -- Developing countries -- Econometric models
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Foreign exchange rates -- Econometric models
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Monetary policy -- Econometric models
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Developing countries
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| Form |
Electronic book
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| Author |
Buffie, Edward F., author.
|
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Zanna, Luis-Felipe, (IMFstaff)
|
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International Monetary Fund. Research Department, issuing body.
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International Monetary Fund. Strategy, Policy, and Review Department, issuing body.
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International Monetary Fund. Institute for Capacity Development, issuing body.
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| ISBN |
1513567438 |
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9781513567433 |
| ISSN |
1018-5941 |
|
