In this paper we investigate the impact of financial globalization on the behavior of inflation targeting emerging market economies with respect to exchange rate – do central banks respond to exchange rate movements or not. We use quarterly data for six emerging market inflation targeting...

Monetary policy instruments differ in tightness-how closely they are linked to inflation-and transparency-how easily they can be monitored. Tightness is always desirable in a monetary policy instrument; when is transparency? When a government cannot commit to follow a given policy. We apply this...

This paper shows that the conditions under which inflation-targeting interest rate rules lead to equilibrium uniqueness in a small open economy in general differ from those in a closed economy. As the monetary authority adjusts nominal interest rates in response to inflation, the real interest...

This paper introduces a novel monetary policy framework where the exchange rate becomes the central instrument. Using Singapore as a case study, it explores the Monetary Authority's adoption of the exchange rate as the primary tool since 1981, diverging from conventional approaches centered on...

Previous studies have shown that, under certain conditions, a central bank could achieve a better trade-off between inflation and output volatility by replacing its inflation target with a price-level target. This paper studies whether a Taylor rule that targets the price-level instead of the...

The zero lower bound on nominal interest rates constrains the central bank's ability to stimulate the economy during downturns. We use the FRB/US model to quantify the effects of the bound on macroeconomic stabilization and to explore how policy can be designed to minimize these effects. During...

We lay out a small open economy version of the Calvo sticky price model, and show how the equilibrium dynamics can be reduced to simple representation in domestic inflation and the output gap. We use the resulting framework to analyze the macroeconomic implications of three alternative...

This paper studies the relative performance of alternative monetary policy rules in the presence of oil price shocks in a small open economy optimizing model. Our analysis shows that it is important to distinguish between alternative price indices (CPI, core CPI, and GDP deflator) when modeling...