A Simple Dge Model For Inflation Targeting
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| Author | : Jaromir Benes |
| Publisher | : International Monetary Fund |
| Total Pages | : 102 |
| Release | : 2007-08 |
| Genre | : Business & Economics |
| ISBN | : |
The paper presents a DGE model designed as a core projection tool to support monetary policy in inflation-targeting (IT) emerging market economies. The paper uses a particularly simple and flexible general equilibrium model structure that can be amended to account for various phenomena that often complicate policy analysis in emerging markets, such as persistent trends in relative prices. The model's calibration is intuitive and can draw on the vast experience many countries have with calibrating small 'gap' models of monetary policy transmission. Moreover, the definition of the model's steady state in terms of nominal expenditure ratios, rather than levels of real variables, allows for the easy use of the model in a regular forecast production cycle in an IT central bank. The paper tests the model's properties on recent Turkish data, demonstrating that the main stylized features relevant for monetary policy making are well captured by the model.
| Author | : Ben S. Bernanke |
| Publisher | : University of Chicago Press |
| Total Pages | : 469 |
| Release | : 2007-11-01 |
| Genre | : Business & Economics |
| ISBN | : 0226044734 |
Over the past fifteen years, a significant number of industrialized and middle-income countries have adopted inflation targeting as a framework for monetary policymaking. As the name suggests, in such inflation-targeting regimes, the central bank is responsible for achieving a publicly announced target for the inflation rate. While the objective of controlling inflation enjoys wide support among both academic experts and policymakers, and while the countries that have followed this model have generally experienced good macroeconomic outcomes, many important questions about inflation targeting remain. In Inflation Targeting, a distinguished group of contributors explores the many underexamined dimensions of inflation targeting—its potential, its successes, and its limitations—from both a theoretical and an empirical standpoint, and for both developed and emerging economies. The volume opens with a discussion of the optimal formulation of inflation-targeting policy and continues with a debate about the desirability of such a model for the United States. The concluding chapters discuss the special problems of inflation targeting in emerging markets, including the Czech Republic, Poland, and Hungary.
| Author | : Masaru Aoki |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
The inflation targeting policy, which is adopted in a lot of countries in recent years, has been introduced with a band target in most countries. However, in the many theoretical analysis, the target of the inflation rate is assumed to be a point, and the studies that have treated the following problem, 'Why does the central bank set the band target?' are very few. In this paper, to treat the above-problem, we make the inflation band targeting model which is based on Barro and Gordon(1983) model. After defining the Credibility for the inflation targeting policy, we show the condition which the central bank adopts it, and inflation band targeting can be solved the time inconsistency problem when this condition is satisfied. Moreover, when the central bank has few information on the private agents' expectations formation of inflation, we show the criteria how they should determine the upper bound and the lower bound of a target range. This model's characterized are the following; (1) to show that the central bank can adopt the inflation band targeting without changing their objective function, (2) to consider the interaction between inflation targeting policy and the private agents' expectations formation of inflation, (3) to show the criteria how the central bank can determine the upper and lower bound of a range to set their maximal welfare when information on the private agents' expectations formation of inflation is imperfect.
| Author | : John B. Taylor |
| Publisher | : University of Chicago Press |
| Total Pages | : 460 |
| Release | : 2007-12-01 |
| Genre | : Business & Economics |
| ISBN | : 0226791262 |
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 | : Jeremy Bay Rudd |
| Publisher | : |
| Total Pages | : 50 |
| Release | : 2003 |
| Genre | : Inflation (Finance) |
| ISBN | : |
| Author | : Mr.Paul R. Masson |
| Publisher | : International Monetary Fund |
| Total Pages | : 54 |
| Release | : 1997-10-01 |
| Genre | : Business & Economics |
| ISBN | : 145185515X |
Inflation targeting (IT) serves as monetary policy framework in several advanced economies, where it has enhanced policy transparency and accountability. The paper considers its wider applicability to developing countries. The prerequisites for a successful IT framework are identified as an ability to carry out an independent monetary policy (free of fiscal dominance or commitment to another nominal anchor, like the exchange rate) and a quantitative framework linking policy instruments to inflation. These prerequisites are largely absent among developing countries, though several of them could with some further institutional changes and an overriding commitment to low inflation make use of an IT framework.
| Author | : Davide Debortoli |
| Publisher | : International Monetary Fund |
| Total Pages | : 56 |
| Release | : 2017-07-21 |
| Genre | : Business & Economics |
| ISBN | : 1484311752 |
Yes, it makes a lot of sense. This paper studies how to design simple loss functions for central banks, as parsimonious approximations to social welfare. We show, both analytically and quantitatively, that simple loss functions should feature a high weight on measures of economic activity, sometimes even larger than the weight on inflation. Two main factors drive our result. First, stabilizing economic activity also stabilizes other welfare relevant variables. Second, the estimated model features mitigated inflation distortions due to a low elasticity of substitution between monopolistic goods and a low interest rate sensitivity of demand. The result holds up in the presence of measurement errors, with large shocks that generate a trade-off between stabilizing inflation and resource utilization, and also when ensuring a low probability of hitting the zero lower bound on interest rates.
| Author | : Glenn D. Rudebusch |
| Publisher | : |
| Total Pages | : 66 |
| Release | : 1998 |
| Genre | : Anti-inflationary policies |
| ISBN | : |
Policy rules that are consistent with inflation targeting are examined in a small macroeconomic model of the US economy. We compare the properties and outcomes of explicit instrument rules' as well as targeting rules.' The latter, which imply implicit instrument rules, may be closer to actual operating procedures of inflation-targeting central banks. We find that inflation forecasts are central for good policy rules under inflation targeting. Some simple instrument and targeting rules do remarkably well relative to the optimal rule; others, including some that are often used as representing inflation targeting, do less well.
| Author | : Lars E. O. Svensson |
| Publisher | : |
| Total Pages | : 32 |
| Release | : 2002 |
| Genre | : Anti-inflationary policies |
| ISBN | : |
The paper discusses how current inflation targeting should be modeled, and argues that it is better represented as a commitment to a targeting rule (a rule specifying operational objectives for monetary policy or a condition for the target variables), than as a commitment to a simple instrument rule (like a Taylor rule).
| Author | : Jordi Galí |
| Publisher | : Princeton University Press |
| Total Pages | : 295 |
| Release | : 2015-06-09 |
| Genre | : Business & Economics |
| ISBN | : 1400866278 |
The classic introduction to the New Keynesian economic model This revised second edition of Monetary Policy, Inflation, and the Business Cycle provides a rigorous graduate-level introduction to the New Keynesian framework and its applications to monetary policy. The New Keynesian framework is the workhorse for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare. A backbone of the new generation of medium-scale models under development at major central banks and international policy institutions, the framework provides the theoretical underpinnings for the price stability–oriented strategies adopted by most central banks in the industrialized world. Using a canonical version of the New Keynesian model as a reference, Jordi Galí explores various issues pertaining to monetary policy's design, including optimal monetary policy and the desirability of simple policy rules. He analyzes several extensions of the baseline model, allowing for cost-push shocks, nominal wage rigidities, and open economy factors. In each case, the effects on monetary policy are addressed, with emphasis on the desirability of inflation-targeting policies. New material includes the zero lower bound on nominal interest rates and an analysis of unemployment’s significance for monetary policy. The most up-to-date introduction to the New Keynesian framework available A single benchmark model used throughout New materials and exercises included An ideal resource for graduate students, researchers, and market analysts
