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Author: Laurence Ball Publisher: ISBN: Category : Anti-inflationary policies Languages : en Pages : 34
Book Description
This essay discusses rules for monetary policy in open economies. If policymakers seek to stabilize output and inflation, optimal rules in open economies differ considerably from optimal rules in closed economies. In open economies, stability is best achieved by targeting long-run inflation' a measure of inflation adjusted to remove transitory effects of exchange-rate movements. Stability is also enhanced by adding an exchange-rate term to "Taylor rules" for setting interest rates. Finally, central banks must choose whether their policy instrument is an interest rate or a "monetary conditions index": an average of the interest rate and the exchange rate. The nature of shocks to the exchange rate determines which of these choices keeps output and inflation more stable.
Author: Laurence Ball Publisher: ISBN: Category : Anti-inflationary policies Languages : en Pages : 34
Book Description
This essay discusses rules for monetary policy in open economies. If policymakers seek to stabilize output and inflation, optimal rules in open economies differ considerably from optimal rules in closed economies. In open economies, stability is best achieved by targeting long-run inflation' a measure of inflation adjusted to remove transitory effects of exchange-rate movements. Stability is also enhanced by adding an exchange-rate term to "Taylor rules" for setting interest rates. Finally, central banks must choose whether their policy instrument is an interest rate or a "monetary conditions index": an average of the interest rate and the exchange rate. The nature of shocks to the exchange rate determines which of these choices keeps output and inflation more stable.
Author: Publisher: ISBN: Category : Languages : en Pages :
Book Description
The National Bureau of Economic Research, Inc. offers an abstract of the September 2000 working paper entitled "Policy Rules and External Shocks," written by Laurence Ball. The full text may be purchased online. This paper examines rules for monetary policy in open economies. Ball discusses the choice of policy instruments for central banks, either interest rates or an average of the interest rate and the exchange rate.
Author: Mr.Eduardo Morón Publisher: International Monetary Fund ISBN: 1451845855 Category : Business & Economics Languages : en Pages : 37
Book Description
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, this paper examines alternative monetary policy rules for economies with different degrees of liability dollarization. The paper answers the question of how efficient it is to use inflation targeting under high liability dollarization. Our findings suggest that it might be optimal to follow a nonlinear policy rule that defends the real exchange rate in a financially vulnerable economy.
Author: International Monetary Fund Publisher: International Monetary Fund ISBN: 1498344062 Category : Business & Economics Languages : en Pages : 74
Book Description
Over the past two decades, many low- and lower-middle income countries (LLMICs) have improved control over fiscal policy, liberalized and deepened financial markets, and stabilized inflation at moderate levels. Monetary policy frameworks that have helped achieve these ends are being challenged by continued financial development and increased exposure to global capital markets. Many policymakers aspire to move beyond the basics of stability to implement monetary policy frameworks that better anchor inflation and promote macroeconomic stability and growth. Many of these LLMICs are thus considering and implementing improvements to their monetary policy frameworks. The recent successes of some LLMICs and the experiences of emerging and advanced economies, both early in their policy modernization process and following the global financial crisis, are valuable in identifying desirable features of such frameworks. This paper draws on those lessons to provide guidance on key elements of effective monetary policy frameworks for LLMICs.
Author: Akila Weerapana Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
This paper examines the performance of simple monetary policy rules in a two country open economy model under both cooperative and non cooperative settings. In particular, it examines the extent to which simple policy rules with external variables and simple policy rules under policy coordination can help improve an adversely affected economy: one that faces greater persistence of inflation, higher volatility of shocks, and a greater vulnerability to exchange rate fluctuations. We isolate the impact of individual asymmetries through simulations that introduce differences into two, otherwise symmetric, economies. The paper shows that the results vary according to the underlying cause of the adverse performance. Greater inflation persistence and higher volatility of shocks irreversibly worsen macroeconomic outcomes while greater external vulnerability affect the distribution of cooperative gains: the less-insulated economy benefits at the expense of the more-insulated economy. Furthermore, the reaction coefficients in the simple policy rules behave in an intuitive fashion: both policy cooperation and reaction to external shocks substantially attenuate the reaction coefficients on inflation and unemployment.
Author: John B. Taylor Publisher: University of Chicago Press ISBN: 0226791262 Category : Business & Economics Languages : en Pages : 460
Book Description
This timely volume presents the latest thinking on the monetary policy rules and seeks to determine just what types of rules and policy guidelines function best. A unique cooperative research effort that allowed contributors to evaluate different policy rules using their own specific approaches, this collection presents their striking findings on the potential response of interest rates to an array of variables, including alterations in the rates of inflation, unemployment, and exchange. Monetary Policy Rules illustrates that simple policy rules are more robust and more efficient than complex rules with multiple variables. A state-of-the-art appraisal of the fundamental issues facing the Federal Reserve Board and other central banks, Monetary Policy Rules is essential reading for economic analysts and policymakers alike.
Author: International Monetary Fund Publisher: International Monetary Fund ISBN: 1451922876 Category : Business & Economics Languages : en Pages : 48
Book Description
Effects of different policy rules are simulated: uncoordinated targeting of the money supply or nominal income, use of monetary policy to achieve coordinated targets for nominal or real exchange rates, and the use of monetary and fiscal policies to hit targets for internal and external balance. The following conclusions emerge: rules which performed best for some shocks performed poorly for others; monetary policy was ineffective in limiting movements in real exchange rates; unconstrained use of fiscal policy was quite powerful in influencing real variables; and dynamic instability was a potentially serious problem. Robustness to different specifications and to constraints on instruments remains to be examined.
Author: Laurence Ball
Author: Laurence Ball
Author: 
Author: Carlos Balseyro Rodriguez
Author: Mr.Eduardo Morón
Author: Yasin Mimir
Author: International Monetary Fund
Author: Akila Weerapana
Author: John B. Taylor
Author: International Monetary Fund
Author: J. Peter Neary