Arbeitspapier
Alternative monetary-policy instruments and limited credibility: An exploration
We evaluate the dynamics of a small and open economy under alternative simple rules for different monetary-policy instruments, in a model with imperfectly anchored expectations. The inflation-targeting consensus is that interest-rate rules are preferred, instead of using either a monetary aggregate or the exchange rate; with arguments usually presented under rational expectations and full credibility. In contrast, we assume agents use econometric models to form inflation expectations, capturing limited credibility. In particular, we emphasize the exchange rate's role in shaping medium- and long-term inflation forecasts. We compare the dynamics after a shock to external-borrowing costs (arguably one of the most important sources of fluctuations in emerging countries) under three policy instruments: a Taylor-type rule for the interest rate, a constant-growth-rate rule for monetary aggregates, and a fixed exchange rate. The analysis identifies relevant trade-offs in choosing among alternative instruments, showing that the relative ranking is indeed influenced by how agents form inflation-related expectations.
- Sprache
-
Englisch
- Erschienen in
-
Series: Economic Research Working Papers ; No. 91
- Klassifikation
-
Wirtschaft
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Garcia-Cicco, Javier
- Ereignis
-
Veröffentlichung
- (wer)
-
Banco Central de la República Argentina (BCRA), Investigaciones Económicas (ie)
- (wo)
-
Buenos Aires
- (wann)
-
2021
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:45 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Garcia-Cicco, Javier
- Banco Central de la República Argentina (BCRA), Investigaciones Económicas (ie)
Entstanden
- 2021
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