A model of inflation targeting in an open economy

Autor:	Jay H. Levin
Rok vydání:	2004
Předmět:	Inflation Economics and Econometrics Inflation targeting Keynesian economics media_common.quotation_subject Monetary policy Monetary economics Taylor rule Interest rate parity Exchange rate Accounting Economics Real interest rate Phillips curve Finance media_common
Zdroj:	International Journal of Finance & Economics. 9:347-362
ISSN:	1099-1158 1076-9307
DOI:	10.1002/ijfe.243
Popis:	This paper develops a model of inflation targeting in a small open economy under floating exchange rates. The central bank follows a simple Taylor rule to achieve a target inflation rate, and the inflation process itself is determined by an expectations augmented Phillips curve mechanism. The behaviour of the exchange rate is governed by uncovered interest parity as a benchmark case, and both exchange rate expectations and inflationary expectations are assumed to be held with perfect foresight. Finally, the level of output in the economy varies gradually in response to excess demand in the goods sector. The paper analyses the effects of two shocks, a reduction in the central bank's target inflation rate and a sudden increase in aggregate demand. The effects of these shocks in a large country engaged in inflation targeting on the outside world follow from these results. Copyright © 2004 John Wiley & Sons, Ltd.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::d39c48fe02566c11b8f61d86db51f86b https://doi.org/10.1002/ijfe.243 Zobrazit plný text záznamu Plný text ve formátu PDF