This paper analyzes the impact of capital market openness on exchange rate pass-through and subsequently on the social 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...

This paper discusses the design of monetary policy in a New Keynesian small open economy framework by introducing nominal wage rigidities and incomplete exchange rate pass-through on import prices. Three main findings are summarized. First, with the existence of an incomplete exchange rate...

This study analyses the aspect of inflation expectations management in the context of inflation targeting by particularly focusing on the impact of exchange rate pass-through to inflation expectations in a small open economy. We also augment the inflation expectations function with GDP,...