Monetary And Fiscal Rules In An Emerging Small Open Economy

Author : Nicoletta Batini
Publisher :
ISBN 13 :
Total Pages : 80 pages
Book Rating : 4.42/5 ( download)

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Download or read book Monetary and Fiscal Rules in an Emerging Small Open Economy written by Nicoletta Batini and published by . This book was released on 2009 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a optimal rules-based interpretation of the 'three pillars macroeconomic policy framework': a combination of a freely floating exchange rate, an explicit target for inflation, and a mechanism than ensures a stable government debt-GDP ratio around a specified long run. We show how such monetary-fiscal rules need to be adjusted to accommodate specific features of emerging market economies. The model takes the form of two-blocs, a DSGE emerging small open economy interacting with the rest of the world and features, in particular, financial frictions It is calibrated using Chile and US data. Alongside the optimal Ramsey policy benchmark, we model the three pillars as simple monetary and fiscal rules including and both domestic and CPI inflation targeting interest rate rules alongside a 'Structural Surplus Fiscal Rule' as followed recently in Chile. A comparison with a fixed exchange rate regime is made. We find that domestic inflation targeting is superior to partially or implicitly (through a CPI inflation target) or fully attempting to stabilizing the exchange rate. Financial frictions require fiscal policy to play a bigger role and lead to an increase in the costs associated with simple rules as opposed to the fully optimal policy.

Author : Nicoletta Batini
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.84/5 ( download)

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Download or read book IMF Working Papers written by Nicoletta Batini and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Author : Jasmin Sin
Publisher : International Monetary Fund
ISBN 13 : 1475533632
Total Pages : 34 pages
Book Rating : 4.37/5 ( download)

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Download or read book The Fiscal Multiplier in Small Open Economy written by Jasmin Sin and published by International Monetary Fund. This book was released on 2016-09-07 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the fiscal multiplier using a small-open-economy DSGE model enriched with financial frictions. It shows that the multiplier is large when frictions are present in domestic and international financial markets. The reason is that in the model government bonds are more liquid than private financial assets and that entrepreneurs face liquidity constraints. A bond-financed fiscal expansion eases these constraints and stimulates investment and hence growth. This mechanism, however, breaks down under the assumption of perfect international capital mobility, suggesting that conventional models which ignore the presence of frictions in international capital markets tend to underestimate the fiscal multiplier.

Author : Douglas Laxton
Publisher :
ISBN 13 :
Total Pages : 74 pages
Book Rating : 4.14/5 ( download)

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Download or read book Monetary Rules for Small, Open, Emerging Economies written by Douglas Laxton and published by . This book was released on 2003 with total page 74 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a variant of the IMF's Global Economic Model (GEM) suitable to analyze macroeconomic dynamics in open economies, and uses it to assess the effectiveness of Taylor rules and Inflation-Forecast-Based (IFB) rules in stabilizing variability in output and inflation. Our findings suggest that a simple IFB rule that does not rely upon any direct estimates of the equilibrium real interest rate and places a relatively high weight on the inflation forecast may perform better in small open economies than conventional Taylor rules.

Author : Carlos A. Vegh
Publisher : MIT Press
ISBN 13 : 026201890X
Total Pages : 911 pages
Book Rating : 4.06/5 ( download)

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Download or read book Open Economy Macroeconomics in Developing Countries written by Carlos A. Vegh and published by MIT Press. This book was released on 2013-08-30 with total page 911 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive and rigorous text that shows how a basic open economy model can be extended to answer important macroeconomic questions that arise in emerging markets. This rigorous and comprehensive textbook develops a basic small open economy model and shows how it can be extended to answer many important macroeconomic questions that arise in emerging markets and developing economies, particularly those regarding monetary, fiscal, and exchange rate issues. Eschewing the complex calibrated models on which the field of international finance increasingly relies, the book teaches the reader how to think in terms of simple models and grasp the fundamentals of open economy macroeconomics. After analyzing the standard intertemporal small open economy model, the book introduces frictions such as imperfect capital markets, intertemporal distortions, and nontradable goods, into the basic model in order to shed light on the economy's response to different shocks. The book then introduces money into the model to analyze the real effects of monetary and exchange rate policy. It then applies these theoretical tools to a variety of important macroeconomic issues relevant to developing countries (and, in a world of continuing financial crisis, to industrial countries as well), including the use of a nominal interest rate as a main policy instrument, the relative merits of flexible and predetermined exchange rate regimes, and the targeting of “real anchors.” Finally, the book analyzes in detail specific topics such as inflation stabilization, “dollarization,” balance of payments crises, and, inspired by recent events, financial crises. Each chapter includes boxes with relevant empirical evidence and ends with exercises. The book is suitable for use in graduate courses in development economics, international finance, and macroeconomics.

Author : International Monetary Fund
Publisher : International Monetary Fund
ISBN 13 : 1451931239
Total Pages : 33 pages
Book Rating : 4.35/5 ( download)

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Download or read book Dynamics of Devaluation and "Equivalent" Fiscal Policies for a Small Open Economy written by International Monetary Fund and published by International Monetary Fund. This book was released on 1989-01-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: In pursuing a steady-state reserve target, policymakers in small open economies can resort to devaluation or to temporary increases in public saving. This paper contrasts the dynamic implications of these alternative policies in a model with optimizing agents who possess perfect foresight. In general, the private sector cannot be insulated from the effects of the government’s reserve-accumulation policies. The dynamic effects of devaluation depend on the fiscal policy rule in effect. In contrast to devaluation, the “equivalent” fiscal policies imply discontinuities in private consumption and temporary tax increases may cause key macroeconomic variables to overshoot their steady-state values.

Author : DeLisle Worrell
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 34 pages
Book Rating : 4.22/5 ( download)

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Download or read book Monetary and Fiscal Coordination in Small Open Economies written by DeLisle Worrell and published by International Monetary Fund. This book was released on 2000-03 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is concerned with the design of institutional arrangements for low inflation in small open economies. In the real world of information asymmetries, uncertain expectations and changeable preferences, it is not enough to create an autonomous and publicly accountable central bank. In addition, the central bank and the treasury must work together on the design, implementation, monitoring and, when necessary, the revision of macroeconomic policy, and on providing the public with information on ongoing economic developments and interpretation of the macroeconomic strategy.

Author : Nicoletta Batini
Publisher : International Monetary Fund
ISBN 13 : 1451871694
Total Pages : 80 pages
Book Rating : 4.92/5 ( download)

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Download or read book “Monetary and Fiscal Rules in an Emerging Small Open Economy” written by Nicoletta Batini and published by International Monetary Fund. This book was released on 2009-01-01 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a optimal rules-based interpretation of the 'three pillars macroeconomic policy framework': a combination of a freely floating exchange rate, an explicit target for inflation, and a mechanism than ensures a stable government debt-GDP ratio around a specified long run. We show how such monetary-fiscal rules need to be adjusted to accommodate specific features of emerging market economies. The model takes the form of two-blocs, a DSGE emerging small open economy interacting with the rest of the world and features, in particular, financial frictions It is calibrated using Chile and US data. Alongside the optimal Ramsey policy benchmark, we model the three pillars as simple monetary and fiscal rules including and both domestic and CPI inflation targeting interest rate rules alongside a 'Structural Surplus Fiscal Rule' as followed recently in Chile. A comparison with a fixed exchange rate regime is made. We find that domestic inflation targeting is superior to partially or implicitly (through a CPI inflation target) or fully attempting to stabilizing the exchange rate. Financial frictions require fiscal policy to play a bigger role and lead to an increase in the costs associated with simple rules as opposed to the fully optimal policy.

Author : Mr.F. Gulcin Ozkan
Publisher : International Monetary Fund
ISBN 13 : 1498375421
Total Pages : 34 pages
Book Rating : 4.29/5 ( download)

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Download or read book On the use of Monetary and Macroprudential Policies for Small Open Economies written by Mr.F. Gulcin Ozkan and published by International Monetary Fund. This book was released on 2014-06-24 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore optimal monetary and macroprudential policy rules for a small open economy. Delegating 'lean against the wind' squarely to macroprudential policy provides a more robust policy mix to shock uncertainty—(i) if macroprudential measures exist, there are no significant welfare gains from monetary policy reacting to credit growth under a financial shock; and (ii) monetary responses to financial markets could generate bigger welfare losses than macroprudential responses under different shocks. The source of outstanding liabilities also plays a role in the choice of policy instrument— macroprudential policies are particularly effective for emerging markets where foreign borrowing is sizeable.

Author : Aliya Algozhina
Publisher :
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.65/5 ( download)

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Download or read book Monetary and fiscal policy interactions in an emerging open economy exposed to sudden stops shock : a DSGE approach written by Aliya Algozhina and published by . This book was released on 2012 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: