Anticipated Raw Materials Price Shocks and Monetary Policy Response - A New Keynesian Approach

Roland Winkler () and Hans-Werner Wohltmann

No 2006-19, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: The paper analyzes the dynamic effects of anticipated raw materials price increases for small open oil-dependent economies and investigates the consequences of several monetary policy rules in response to commodity price shocks. Based on a calibrated New Keynesian open economy model the analysis shows that anticipated increases in the price of oil will involve oil-dependent economies both in temporary inflation and deflation as well as in output expansion and contraction. Compared to an interest rate Taylor rule a money growth rule is more appropriate to reduce the volatility of the CPI inflation rate whereas just the opposite holds for stabilizing the output gap.

Keywords: Oil price shocks; Monetary Policy; Open Economy (search for similar items in EconPapers)
JEL-codes: E32 E52 F41 Q43 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cba, nep-ene, nep-mac and nep-mon
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:5175

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