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The management of the exchange rate is possible only if the government pursues a monetary-fiscal policy mix which is consistent with its exchange rate targets. In this paper with uncertainty concerning the length of individual life the real consequences of exchange rate management depend on the...
Persistent link: https://www.econbiz.de/10012477494
The collapse of a fixed exchange rate is typically marked by a sudden balance-of-payments crisis in which"speculators" fleeing from the domestic currency acquire a large portion of the central bank's foreign exchange holdings.Faced with such an attack, the central bank often withdraws...
Persistent link: https://www.econbiz.de/10012477999
The paper develops a model of exchange-rate and current-account determination for a small economy peopled by infinitely lived, utility-maximizing households. In this setting, a central-bank purchase of foreign exchange has no real effects when central-bank foreign reserves earn interest at the...
Persistent link: https://www.econbiz.de/10012478526
This paper investigates the long- and short-run neutrality of open-market monetary policy in a world of fixed exchange rates and imperfect substitutability between bonds denominated in different currencies. Using an illustrative portfolio-balance model, it shows that when the public discounts...
Persistent link: https://www.econbiz.de/10012478607
Even when the exchange-rate plays no expenditure-switching role, countries may wish to have flexible exchange rates in order to free the domestic interest rate as a stabilization tool. In a setting with nontraded goods, exchange-rate movements may also enhance international risk sharing
Persistent link: https://www.econbiz.de/10012465961
the instrument responds to all information that significantly affects the projections of inflation and the output gap …
Persistent link: https://www.econbiz.de/10012469217
transformation and substitution between the target variables. Targeting rules allow the use of judgment and extra-model information …
Persistent link: https://www.econbiz.de/10012469282
In recent years, many countries have instituted monetary reforms aimed at improving anti-inflation credibility. Is it a problem, however, that international welfare spillover effects seldom receive much consideration in the design of monetary reforms? Surprisingly, the answer may be no. Under...
Persistent link: https://www.econbiz.de/10012470879
Previous analysis of the implementation of inflation targeting is extended to monetary policy responses to different shocks, consequences of model uncertainty, effects of interest rate smoothing and stabilization, a comparison with nominal GDP targeting, and implications of forward-looking...
Persistent link: https://www.econbiz.de/10012472859
Inflation targeting is shown to imply inflation forecast targeting: the central bank's inflation forecast becomes an explicit intermediate target. Inflation forecast targeting simplifies both implementation and monitoring of monetary policy. The weight on output stabilization determines how...
Persistent link: https://www.econbiz.de/10012473036