Hybrid Inflation Targeting Regimes

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. Financia

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Year of publication:	2009
Authors:	Garcia, Carlos
Other Persons:	Restrepo, Jorge (contributor) ; Roger, Scott (contributor)
Publisher:	Washington : International Monetary Fund
Subject:	Inflationssteuerung \| Inflation targeting \| Welt \| World \| Inflationsbekämpfung \| Anti-inflation policy

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Extent:	Online-Ressource (87 p)
Series:	IMF Working Papers ; v.Working Paper No. 09/234 IMF working paper ; 09/234
Type of publication:	Book / Working Paper
Language:	English
Notes:	Description based upon print version of record Cover Page; Title Page; Copyright Page; Contents; Introduction; I. Inflation Targeting in an Open Economy; II. Model Characteristics and Calibration; The small open economy model; Calibration of "advanced" and "emerging economy" models; III. A Taxonomy of Hybrid Inflation Targeting Approaches; "Plain vanilla" inflation targeting in an open economy; Open-economy inflation targeting; Inflation targeting with an exchange rate band; Exchange rate-based inflation targeting; IV. Evaluation of Hybrid Inflation Targeting Rules; Hybrid policy rules and the inflation-output volatility trade-off 1. Plain Vanilla Inflation Targeting in the Robust Advanced Economy and the Vulnerable Emerging Economy2. Alternative Hybrid Policy Rules and the Variability of Inflation and Output in Advanced and Emerging Market Economies; How much weight to put on the exchange rate in a hybrid policy rule?; 3. The Impact of Exchange Rate Smoothing on the Variability of Inflation and Output in Robust Advanced and Vulnerable Emerging Market Economies; How hybrid policy rules affect a wider range of macroeconomic variables? 4. Performance of Alternative Policy Rules on Macroeconomic and Financial Volatility in Advanced and Emerging Market Economies1. Macroeconomic and Financial Volatility Associated with Alternative Policy Rules; General assessment; Caveats; I. Optimization in the Model; II. Calibration of the Model; 1. Parameter Calibration of the Advanced and Emerging Market Economy; III. Simulations; A. Construction of Volatility Trade-off Frontiers; 2. Reaction Function Coefficients; 1: Inflation and Output Volatility With Demand Shocks and Plain Vanilla Inflation Targeting; B. Impulse Responses Domestic demand shocks2. Responses to a Demand Shock; Cost-push shocks; 3. Responses to a Cost-push Shock; Risk premium shocks; 4. Responses to a Risk Premium Shock; C. Volatility of Macroeconomic and Financial Variables Under Different Policy Rules; 3a. Performance of Alternative Policy Rules in Response to Demand Shocks; 3b. Performance of Alternative Policy Rules in Response to Cost-Push Shocks; 3c. Performance of Alternative Policy Rules in Response to Risk Premium Shocks; References; Footnotes
ISBN:	978-1-4518-7381-8 ; 978-1-4527-4198-7 ; 978-1-4518-7381-8
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10012677869