Monetary Policy Rules for Financially Vulnerable EconomieEd

Eduardo Moron and Diego Winkelried

Macroeconomics from University Library of Munich, Germany

Abstract: One distinguishable characteristic of emerging economies is that they are not financially robust. These economies are incapable to smooth out large external shocks as sudden capital outflows imply large and abrupt swings in the real exchange rate. Using a small open economy model this paper examines alternative monetary policy rules for economies with different degrees of liability dollarization. The paper answers the question of how efficient is to use inflation targeting under high liability dollarization. Our findings suggest that it might be optimal to follow a non-linear policy rule that defends the real exchange rate in a financially vulnerable economy.

JEL-codes: E52 E58 F41 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2002-05-01
New Economics Papers: this item is included in nep-ifn and nep-mon
Note: Type of Document - pdf; prepared on IBM PC - PC-TEX/; to print on HP; pages: 30
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https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0205/0205001.pdf (application/pdf)

Related works:
Journal Article: Monetary policy rules for financially vulnerable economies (2005)
Working Paper: Monetary Policy Rules for Financially Vulnerable Economies (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0205001

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