In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We analyze this result in the context of developing economies, where a large proportion of households are credit constrained...

We develop a semi-structural new-Keynesian open-economy model, with separate food and non-food inflation dynamics, for forecasting and monetary policy analysis in low-income countries and apply it to Kenya. We use the model to run several policy-relevant exercises. First, we filter international...

In recent years, many Low-Income Countries (LICs) have implemented substantial reforms to their monetary policy frameworks, but existing economic research has not provided a clear rationale to guide those efforts. In this paper we analyze the role of monetary policy frameworks in the propagation...

Dutch disease is often referred as a situation in which large and sustained foreign currency inflows lead to a contraction of the tradable sector by giving rise to a real appreciation of the home currency. This paper documents that this syndrome has been witnessed by many emerging markets and...

This paper documents the spread of fiscal rules in the developing world and investigates the relation between fiscal rules and procyclical fiscal policy. We find that, since the early 2000s, developing countries outnumbered advanced economies as users of fiscal rules. Rules were adopted either...

We analyze coordination of monetary and exchange rate policy in a two-sector model of a small open economy featuring imperfect substitution between domestic and foreign financial assets. Our central finding is that management of the exchange rate greatly enhances the efficacy of inflation...

We estimate the determinants of disagreement about future inflation in a large and diversesample of countries, focusing on the role of monetary policy frameworks. We offer novelinsights that allow us to reconcile mixed findings in the literature on the benefits of inflationtargeting regimes and...

Inflation targeting (IT) serves as monetary policy framework in several advanced economies, where it has enhanced policy transparency and accountability. The paper considers its wider applicability to developing countries. The prerequisites for a successful IT framework are identified as an...

This paper explores the role of foreign aid and remittance inflows in the mitigation of the effects of food price shocks. Using a large sample of developing countries and mobilising dynamic panel data specifications, the econometric results yield two important findings. First, remittance and aid...