The Leading eBooks Store Online 4,272,009 members ⚫ 1,419,367 ebooks

New to eBooks.com?

Learn more

Monetary and Fiscal Rules in an Emerging Small Open Economy

Monetary and Fiscal Rules in an Emerging Small Open Economy by Paul Levine
Buy this eBook
US$ 9.00
(If any tax is payable it will be calculated and shown at checkout.)
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.
International Monetary Fund; January 2009
78 pages; ISBN 9781452711737
Read online, or download in secure EPUB or secure PDF format
Title: Monetary and Fiscal Rules in an Emerging Small Open Economy
Author: Paul Levine; Joseph Pearlman; Nicoletta Batini
 
ISBNs
1451916051
9781451871692
9781451916058
9781452711737