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loss function in an inflation-targeting small open economy under a pure commitment policy. Applying the intuition behind … the macroeconomic trilemma, the author examines whether a more open capital market in an inflation-targeting country … investigation reveals that limited capital openness leads to greater pass-through from the exchange rate to domestic inflation …
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Sterilized intervention is generally ineffective. Countries that conduct monetary policy using an overnight, interbank rate as an intermediate target automatically sterilize their interventions. Nonsterilized interventions can influence nominal exchange rates, but they conflict with price...
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