Exchange Rate Management and Inflation Targeting: Modeling the Exchange Rate in Reduced-Form New Keynesian Models

Jaromír Beneš (), Jaromir Hurnik and David Vavra
Additional contact information
Jaromír Beneš: Reserve Bank of New Zealand, http://www.rbnz.govt.nz/

Czech Journal of Economics and Finance (Finance a uver), 2008, vol. 58, issue 03-04, 166-194

Abstract: This paper introduces a strategy for modeling the exchange rate when the monetary authority targets inflation while also managing the exchange rate using interventions. It does so in the framework of a standard reduced-form New Keynesian model of monetary transmission used in many institutions for research, forecasting, and monetary policy analysis. We propose a microfounded modification to the UIP condition which allows for modeling of informal exchange rate bands. Our modeling strategy is useful for most hybrid IT regimes, including those with imperfect control over market interest rates.

Keywords: IT regimes; New Keynesian model; exchange rate; UIP (search for similar items in EconPapers)
JEL-codes: C51 E47 E52 (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://journal.fsv.cuni.cz/storage/1128_str_166_194--benes-hurnik-vavra.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:58:y:2008:i:3-4:p:166-194

Access Statistics for this article

More articles in Czech Journal of Economics and Finance (Finance a uver) from Charles University Prague, Faculty of Social Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Natalie Svarcova ().