Download or read book Nominal Exchange Rate Anchoring Under Inflation Inertia written by Guillermo Calvo and published by International Monetary Fund. This book was released on 2002-02 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a theory of inflation inertia based on forward looking staggered price setting in the nontradable goods sector of a small open economy. Unlike current theories of sticky prices, transitions to a lower steady state inflation rate take time even if they are fully credible, and they are associated with significant output losses in nontradables There is a welfare trade-off between these output losses and the gains from smaller inflationary distortions. Gains exceed losses for most calibrations. The optimal steady state is the Friedman rule.
Download or read book Exchange Rates Nominal Inertia and Inflation written by Jonathan Ireland and published by . This book was released on 1996 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Exchange Rates as Nominal Anchors written by Sebastian Edwards and published by . This book was released on 1992 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses the use of nominal exchange rates as nominal anchors in stabilization programs. The first part deals with the dynamics of inflation in highly indexed economies. It is shown that credible exchange rate anchors will reduce the degree of inflationary inertia. However, if some residual inertia is maintained in some contracts, real exchange rate overvaluation will result. Data from Chile, Mexico and Yugoslavia are used to test the implications of the model. The second part deals with the long run, and uses a 56 countries data set to investigate whether fixed exchange rates have been associated with greater financial discipline.
Download or read book Real Exchange Rates and Inflation in Exchange Rate Based Stabilizations written by Steven B. Kamin and published by . This book was released on 1998 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Considerable research has focused on explaining why currencies appreciate in real terms after the nominal exchange rate is stabilized, but this research generally has taken a theoretical approach, and rarely has tested its hypotheses empirically. In this paper I estimate a simple error-correction model for Mexico, based on the Salter-Swan framework, in which inflation is determined by (1) the gap between the actual real exchange rate and the exchange rate that clears the market for non-traded goods, and (2) persistence effects of past inflation. Using the model, I decompose the excess of Mexican inflation in 1988-94 over peso-adjusted international inflation rates--that is, the real appreciation of the peso--into that part attributable to the initial undervaluation of the peso, that part explained by the subsequent expansion of domestic demand, and that part attributable to inertial inflation. The results indicate that the effects of inertial inflation in appreciating the real exchange rate were quite temporary, lasting only about a year after the stabilization of the peso in 1988. Of the real appreciation that took place between 1988 and 1994, about half was attributable to the expansion of domestic demand--which appreciated the equilibrium real exchange rate in the non-tradeables sector--and about half reflected the correction of the initial undervaluation of the real exchange rate relative to its equilibrium level in the non-tradeables sector. Finally, the paper uses the model to illustrate the impact of various prospective exchange rate policies on inflation and the real exchange rate in Mexico.
Download or read book Asset Prices and Monetary Policy written by John Y. Campbell and published by University of Chicago Press. This book was released on 2008-11-15 with total page 444 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic growth, low inflation, and financial stability are among the most important goals of policy makers, and central banks such as the Federal Reserve are key institutions for achieving these goals. In Asset Prices and Monetary Policy, leading scholars and practitioners probe the interaction of central banks, asset markets, and the general economy to forge a new understanding of the challenges facing policy makers as they manage an increasingly complex economic system. The contributors examine how central bankers determine their policy prescriptions with reference to the fluctuating housing market, the balance of debt and credit, changing beliefs of investors, the level of commodity prices, and other factors. At a time when the public has never been more involved in stocks, retirement funds, and real estate investment, this insightful book will be useful to all those concerned with the current state of the economy.
Download or read book Real Exchange Rates and Inflation in Exchange rate Based Stabilizations written by Steven Kamin and published by . This book was released on 1996 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Inflation Inertia and Credible Disinflation written by Guillermo A. Calvo and published by . This book was released on 2003 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a model of inflation inertia based on optimizing forward looking staggered price setting in a small open economy. Unlike in current models of sticky prices, transitions to a lower steady state inflation rate take time even if they are fully credible, and they are associated with significant output losses. There is a welfare trade-off between these output losses and the gains from smaller inflationary distortions. For reasonable parameter values inflation stabilization improves welfare. The optimal steady state is reached at the Friedman rule. Technical appendices are available at www.nber.org/data-appendix/w9557/ inert-techapp.pdf.
Download or read book Economic Policy Exchange Rates and the International System written by Warner Max Corden and published by OUP Oxford. This book was released on 1994 with total page 342 pages. Available in PDF, EPUB and Kindle. Book excerpt: In an outstanding account of exchange rates inthe international monetary system, W. Max Corden considers the essential issues in international macroeconomics.The author takes as his model the macroeconomic situation of a country with an open economy, and explains the effects of domestic fiscal and monetary macroeconomic policy on exchange rates. He clearly analyses the choices faced by governments attempting to manage both the domestic inflation rateand the external exchange rate and current account balance. Professor Corden then discusses the European Exchange Rate mechanism, and provides a sceptical analysis of the possibilities for monetary union in Europe, and for international policy coordination in general. He gives equal weight todiscussion of the present US-centred international monetary system outside the ERM, and combines theoretical models with an account of the actual determination of floating exchange rates. Although the book itself is orientated towards monetary rather than trade issues, the author discusses twotopical issues: the role of protectionist policies, and the idea of competitiveness. Finally, he looks at the future of the international monetary system and the series of current reform proposals.Students will find this book useful because the author covers essential issues lucidly and authoritatively. The exposition is entirely non-mathematical. Postgraduate students and academics will be interested since Corden is a distinguished writer on international trade and policy, and hisarguments are powerfully presented.New to this edition:This is a revised and expanded edition of a previous book by Corden, Inflation, Exchange Rates and the World Economy, the third edition of which was published in 1985. In this new book, Professor Corden has fully rewritten the text, but retains the discursive, informal, reader-friendly style ofthe earlier editions. In this new edition, Professor Corden has included two new chapters which extend the treatment of macroeconomic policy, separating it into its fiscal and monetary branches. He also includes a new chapter on the role of the current account balance in determining macroeconomicpolicy. The author has brought his account of the present international monetary context up to date - characterised as the non-system - and has included a new analysis of European monetary issues, incorporating a review of the progress of the EMS towards full monetary union. The book also containsa provocative discussion of two highly topical issues: trade protection, and competitiveness, including both new theoretical analysis and such events as the recent GATT agreement.
Download or read book Explaining and Forecasting the Velocity of Money in Transition Economies with Special Reference to the Baltics Russia and other Countries of the Former Soviet Union written by International Monetary Fund and published by International Monetary Fund. This book was released on 1997-09-01 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper identifies a number of stylized facts on the behavior of key macroeconomic variables during high inflation and stabilization in countries in transition. To examine the extent to which these stylized facts conform to the predictions of standard open economy monetary theory, the paper develops a simple monetary model of the exchange rate incorporating price stickiness and inflation inertia, and carries out an econometric analysis of the behavior of real money balances during inflation stabilization. The paper concludes by assessing the prospects for velocity developments in countries in transition, including the likely pace of remonetization.
Download or read book Targeting the Real Exchange Rate written by Guillermo Calvo and published by International Monetary Fund. This book was released on 1994-02 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate. An intertemporal optimizing model suggests that, in the absence of changes in fiscal policy, a more depreciated level of the real exchange can only be attained temporarily. This can be achieved by means of higher inflation and/or higher real interest rates, depending on the degree of capital mobility. Evidence for Brazil, Chile, and Colombia supports the model’s prediction that undervalued real exchange rates are associated with higher inflation.
Download or read book Understanding Inflation Inertia in Angola written by Nir Klein and published by International Monetary Fund. This book was released on 2009-05 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, the decline in inflation in Angola has stalled and further steps may be needed to attain the authorities' medium term goal of meeting the Southern African Development Community (SADC) convergence criteria of a low single digit inflation rate. A Vector Error Correction (VEC) model, which analyzes the factors that affect the inflationary process in Angola, suggests that the inflation path has been largely affected by exchange rate movements. This implies that greater exchange rate flexibility that facilitates a gradual appreciation would be instrumental to moderate price growth through reducing the price of imports and limiting liquidity injection by the National Bank of Angola (BNA). Additionally, the analysis shows that excess liquidity, which is measured by positive deviations of M2 from its equilibrium level, adds to demand pressures, and contributes to inflation with a lag. This underlines the importance of closely monitoring the growth of monetary aggregates as well as improving liquidity management.
Download or read book Does the Exchange Regime Matter for inflation and Growth written by International Monetary Fund and published by International Monetary Fund. This book was released on 1996-09-01 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: Although the theoretical relationships are ambiguous, evidence suggestsa strong link between the choice of the exchange rate regime and economicperformance. The paper argues that adopting a pegged exchange rate canlead to lower inflation, but also to slower growth in productivity. Itfinds that on average per capita GDP growth was slightly faster underfloating regimes than under pegged exchange regimes.
Download or read book Contacts Credibility and Common Knowledge written by Marcus Miller and published by International Monetary Fund. This book was released on 1992-03 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper three possible reasons are examined for a sluggish inflation response to a hard currency peg. Models of overlapping wage contracts are analyzed and shown to generate little inertia. This contrasts with the effects of government credibility and the speed of private sector learning, which are shown to have a major impact on the speed of inflation adjustment. But even if individual agents believe the government will not devalue, it is shown that inflation inertia can still arise if these expectations are not common knowledge.
Download or read book Hitchhiker s Guide to Inflation in Libya written by Mr.Serhan Cevik and published by International Monetary Fund. This book was released on 2013-03-27 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents an empirical investigation of inflation dynamics in Libya over the period 1964–2010, using cointegration and error correction models. While inflation inertia is found to be a key determinant of consumer price inflation, the econometric results indicate that government spending, money supply growth, global inflation, and exchange rate pass-through play central roles in the inflation process. These findings are broadly consistent with the experience of other countries that are natural resource dependent. We also find evidence that the imposition and subsequent removal of international sanctions on Libya had a noteworthy impact on consumer price inflation. Collectively, our estimates indicate that the deviations from an equilibrium path initiate significant adjustments in inflation dynamics, and that closer coordination between monetary and fiscal policies would improve the balance between economic growth and price stability.
Download or read book Exchange Rates and Inflation written by Rudiger Dornbusch and published by MIT Press. This book was released on 1988 with total page 490 pages. Available in PDF, EPUB and Kindle. Book excerpt: Collected for the first time in Exchange Rates and Inflation, twenty-two articles are gathered in four parts covering exchange rate theory, special topics in exchange rate economics, equilibrium real exchange rates, and inflation and stabilization.
Download or read book Floating Exchange Rates and World Inflation written by J. Ahmad and published by Springer. This book was released on 1984-06-28 with total page 270 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Exchange Rate Volatility and World Trade written by International Monetary Fund and published by International Monetary Fund. This book was released on 1984-07-08 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: In View of the continuation of substantial movements in exchange rate relationships among major currencies, the recent increase in protectionist pressures, and the disappointing performance of world trade, renewed concern has been expressed about the possible adverse effects of exchange rate variability on trade. Against the background of this concern, the following decision was reached at the ministerial meeting of the General Agreement of Tariffs and Trade (GATT) in November 1982.
