The GCC countries maintain a policy of open capital accounts and a pegged (or nearly-pegged) exchange rate, thereby reducing their freedom to run an independent monetary policy. This paper shows, however, that the pass-through of policy rates to retail rates is on the low side, reflecting the...

This paper proposes a new taxonomy of monetary regimes defined by the choice and clarity of the nominal anchor. The regimes are as follows: (i) monetary nonautonomy, (ii) weak anchor, (iii) money anchor, (iv) exchange rate peg, (v) full-fledged inflation targeting, (vi) implicit price stability...

Under a flexible inflation targeting regime, should policymakers avoid any reaction to movements in the foreign exchange market? Using data for six advanced open economies explicitly targeting inflation, the paper examines empirically whether real exchange rate disequilibria systematically...

This paper examines the impact of a monetary policy shock on output, prices, and the nominal effective exchange rate for Kenya using data during 1997–2005. Based on techniques commonly used in the vector autoregression literature, the main results suggest that an exogenous increase in the...

This paper lays out a structural model that incorporates key features of monetary transmission in typical emerging-market economies, including a bank-credit channel and the role of external debt accumulation on country risk premia and exchange rate dynamics. We use an SVAR representation of the...

Africa lags behind other regions in attracting foreign direct investment (FDI). In some circumstances, there are obvious explanations for the absence of FDI, such as a high incidence of war. In this paper, we examine the role that monetary and exchange rate policy may have played in explaining...

Norway adopted an inflation targeting framework in early 2001, thus concluding its gradual but consistent move toward greater exchange rate flexibility. This paper assesses the institutional and technical design of the framework, as well as its potential implications for the practical...

Modifications to Japan's monetary policy framework will be needed as positive inflation resumes because the current monetary regime and operations are tailored to ending deflation. The paper suggests that the monetary regime should move from an "anti-deflation" objective to an inflation...

Using data on long-term interest rates for 17 industrial countries, this paper develops some simple measures of monetary policy credibility and then tests if such measures improve the out-of-sample forecasts of conventional models of the inflation-unemployment process. The results provide some...

Policymakers in many emerging markets are attempting to resist currency appreciation while simultaneously meeting targets for inflation. Using the recent experience of Colombia between 2004 and 2007, this paper examines the effectiveness of the Central Bank's intervention in stemming domestic...