Title Global commodity prices, monetary transmission, and exchange rate pass-through in the Pacific Islands / prepared by Shanaka J. Peiri and Ding Ding

Published [Washington, D.C.] : International Monetary Fund, ©2012

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Description 1 online resource (16 pages) Series IMF working paper ; WP/12/176 IMF working paper ; WP/12/176. Contents Cover; Contents; I. Introduction; II. The Choice of a Nominal Anchor; III. Monetary and Exchange Transmission Mechanisms; IV. FPAS Model for Small Island Countries; V. Policy Implications; Appendix I. Identification of VAR; References Summary Pacific Islands countries are vulnerable to commodity price shocks, and this poses challenges to monetary policy. The high degree of exchange rate pass-through to headline inflation and the weak monetary transmission mechanism in PICs suggest a greater efficacy of exchange rate changes in affecting inflation rather than monetary policy. To assess the tradeoff between the use of the exchange rate and monetary policy in macroeconomic stabilization, we employ a model-based approach to examine the optimal policy in response to the historical distribution of exogenous shocks in a Pacific Island (Tonga). The empirical evidence and model simulations tilt in the favor of exchange rate policy given the close relationship between exchange rate changes and headline inflation and the low interest rate sensitivity of aggregate demand Notes Title from PDF title page (IMF Web site, viewed Jul. 17, 2012) Bibliography Includes bibliographical references Notes "Asia and Pacific Department." "July 2012." Print version record Subject Prices -- Islands of the Pacific -- Econometric models Prices -- Tonga -- Econometric models Exchange rate pass-through -- Islands of the Pacific -- Econometric models Exchange rate pass-through -- Tonga -- Econometric models Monetary policy -- Islands of the Pacific -- Econometric models Monetary policy -- Tonga -- Econometric models BUSINESS & ECONOMICS -- Finance. Monetary policy -- Econometric models Prices -- Econometric models Pacific Ocean -- Islands of the Pacific Tonga Form Electronic book Author Ding, Ding, 1958- author. International Monetary Fund. Asia and Pacific Department. ISBN 9781475533330 1475533330

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