Alternative economic policy under a regime with inflation targeting, primary surpluses and a floating exchange rate: an analysis for developing economies

Ricardo Ramalhete Moreira
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Ricardo Ramalhete Moreira: Professor of Economics, Federal University of Espírito Santo, Brazil

European Journal of Economics and Economic Policies: Intervention, 2018, vol. 15, issue 1, 71-90

Abstract: Inflation targeting, primary surpluses and a floating exchange rate under supply and exchange-rate shocks can combine to create deleterious effects on the economic dynamic. This paper reports on computer simulation experiments using a dynamic and stochastic model that can incorporate different restrictions. In general, the data show that under supply and exchange-rate shocks, a better method for minimising social loss includes flexible inflation targeting, counter-cyclical primary surpluses and capital control without eliminating the floating exchange rate.

Keywords: inflation targeting; primary surpluses; exchange-rate fluctuation (search for similar items in EconPapers)
JEL-codes: E52 E63 F32 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:elg:ejeepi:v:15:y:2018:i:1:p71-90

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