Monetary policy conduct: A hybrid framework

Mohamed Douch and Naceur Essadam

MPRA Paper from University Library of Munich, Germany

Abstract: This paper compares the capability of interest rate rules, namely, inflation targeting (IT), price-level targeting (PT) and a combination of the two regime in a hybrid rule (HT) to improve social welfare in a small-open-economy, DSGE-based, New-Keynesian model. Allowing for some inflation inertia, we develop a small-open-economy version of the Calvo sticky-price model to investigate the relative ability of IT, PT and HT to minimize the variability in domestic ination and the output gap. Our analyses show that hybrid targeting outperforms other specifications and produces quantitatively good results, compared to those regimes that target only price levels or inflation rates.

Keywords: Small-Open Economy; Monetary Policy; Hybrid Targeting (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Date: 2008-11
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Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/46547/1/MPRA_paper_46547.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:20715

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