External Shocks and Monetary Policy in a Small Open Oil Exporting Economy

Jean-Pierre Allegret and Mohamed Benkhodja

No 2011-39, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: To investigate the dynamic effect of external shocks on an oil exporting economy, we estimate, using Bayesian approach, a DSGE model based on the features of the Algerian economy. The main purpose is to investigate the dynamic effect of four external shocks (oil price shock, USD/EUR exchange rate shock, international inflation shock and international interest rate shock) and to examine the appropriate monetary policy strategy for Algerian economy, given its structural characteristics and the pattern of the external shocks. We analyze the impulse response functions of our external shocks according to alternative monetary rules. The welfare cost associated with each monetary policy rule has been considered. Our main findings show that, over the period 1990Q1-2010Q4, core inflation monetary rule allows better to stabilize both output and inflation. This rule also appears to be the best way to improve a social welfare.

Keywords: Monetary policy; external shocks; oil exporting economy; Algeria; DSGE model. (search for similar items in EconPapers)
JEL-codes: E3 E5 F4 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2011
New Economics Papers: this item is included in nep-ara, nep-cba, nep-dge, nep-ene, nep-mac and nep-mon
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Citations: View citations in EconPapers (10)

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Related works:
Working Paper: External shocks and monetary policy in a small open oil exporting economy (2012)
Working Paper: External shocks and monetary policy in a small open oil exporting economy (2012)
Working Paper: External Shocks and Monetary Policy in a Small Open Oil Exporting Economy (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2011-39

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