Based on a simple open economy framework, this analysis rationalizes the existence of “fear of floatingâ€-type responses and uncovers some important implications about to role of pass-through effects and contractionary depreciations. By examining how the optimal monetary response varies...

Las monedas locales de los países en vías de desarrollo, además de no ser libremente convertibles a nivel internacional, suelen experimentar niveles de inflación superiores y más volátiles, al tiempo que tienden a sufrir periodos de fuerte apreciación y depreciación. Estas bien conocidas...

The paper develops a New Keynesian Small Open Economy Model charac- terized by external habit formation and Calvo price setting with dynamic inflation updating. The model is used to analyze the e¤ect of nominal ex- change rate targeting on optimal policy and impulse responses. It is found that...

Capital flows often confront central banks with a dilemma: to contain the exchange rate or to allow it to float. To tackle this problem, an equilibrium model of capital flows is proposed. The model captures sudden stops with shocks to the country risk premium. This enables the model to deal with...