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This paper uses data-rich estimation techniques to study monetary policy in an open economy. We apply the techniques to a small, forward-looking model and explore the importance of the exchange rate in the monetary policy rule. This approach allows us to discern whether a monetary authority...
Persistent link: https://www.econbiz.de/10008621750
Persistent link: https://www.econbiz.de/10010372630
The paper identifies the contemporaneous relationship between exchange rate policy and liability dollarization using three different definitions of dollarization. The presence of endogeneity makes the empirical identification elusive. We use identification through heteroskedasticity to solve the...
Persistent link: https://www.econbiz.de/10005825931
This paper explores the role of exchange rates in emerging economies with inflation-targeting regimes, an issue that has become especially germane during the current episode of financial turmoil and volatile capital flows. Under inflation targeting, the interest rate is the main monetary policy...
Persistent link: https://www.econbiz.de/10011245907
This paper examines the exchange rate regimes of East Asian countries since the initial shift by China to a controlled appreciation in July 2005, testing econometrically the weights of key currencies in the implicit baskets that appear to be targeted by East Asian monetary authorities. It finds,...
Persistent link: https://www.econbiz.de/10010575446
Extending Romer's IS-MP-IA model to include foreign trade and exchange rates and applying the GARCH method, the study came to the conclusion that real gross domestic product is negatively associated with the inflation rate, exchange rate depreciation, and the foreign interest rate and positively...
Persistent link: https://www.econbiz.de/10005036546
The change in regime in India from a multi-currency peg to a floating price convertibility provides sufficient motivation for a preliminary analysis of the country s exchange rate behaviour and management between 1993-99.Using international experience as a comparator, the paper finds several...
Persistent link: https://www.econbiz.de/10005125540
Unlike common wisdom, sterilized FX purchases under inflation targeting, i.e., those that keep the interest rate at the level targeted by the central bank, generally increase aggregate demand. We resort to a simple model with a credit channel to argue that FX purchases, by funding bank credit,...
Persistent link: https://www.econbiz.de/10008988798
One distinguishable characteristic of emerging market economies is that they are not financially robust. These economies are incapable of smoothing out large external shocks, as sudden capital outflows imply large and abrupt swings in the real exchange rate. Using a small open-economy model,...
Persistent link: https://www.econbiz.de/10005769066
One-sector inter-temporal models of the current account predict that a transitory shock to the terms of trade will lead to improvement in trade balance, while a persistent (or permanent) one could result in trade balance deterioration. This paper reexamines this issue in a two-sector small open...
Persistent link: https://www.econbiz.de/10009200972