How to order
IMF Publications

Working Papers in full text
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 All


Other research-related activities and publications of the IMF can be found at IMF Research

Free Email Notification

Receive emails when we post new items of interest to you.

Subscribe or Modify your profile



Hybrid Inflation Targeting Regimes

Author/Editor: Roger, Scott | Restrepo, Jorge | Garcia, Carlos
Authorized for Distribution: October 1, 2009
Electronic Access: Free Full Text (PDF file size is 1,179KB)
Use the free Adobe Acrobat Reader to view this PDF file.
 
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This paper uses a DSGE model to examine whether including the exchange rate explicitly in the central bank's policy reaction function can improve macroeconomic performance. It is found that including an element of exchange rate smoothing in the policy reaction function is helpful both for financially robust advanced economies and for financially vulnerable emerging economies in handling risk premium shocks. As long as the weight placed on exchange rate smoothing is relatively small, the effects on inflation and output volatility in the event of demand and cost-push shocks are minimal. Financially vulnerable emerging economies are especially likely to benefit from some exhange rate smoothing because of the perverse impact of exchange rate movements on activity.
 
Order a print copy
Series: Working Paper No. 09/234
Subject(s): Central bank policy | Demand | Developing countries | Economic models | Exchange rates | External shocks | Inflation targeting | Monetary policy | Risk premium
Author's keyword(s): Inflation targeting | monetary policy | exchange rate
 
English  
    Published:   October 1, 2009        
            Format:   Paper
    Stock No:   WPIEA2009234   Pages:   57
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
Please address any questions about this title to publications@imf.org.