Inflation Targeting and Exchange Rate Flexibility

Topics:
Inflation
Tags:
Currency & Foreign Exchange,
Exchange Rate,
Finance,
Free Trade,
Inflation
Source:
Stanford Knowledgebase

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Overview: Inflation targeting must target the price level as opposed to forward-looking inflation for uniqueness of perfect foresight equilibria. Its performance is very similar to exchange rate targeting. Money targeting displays real exchange rate flexibility in response to foreign shocks, while exchange rate and inflation targeting permit accommodation of money demand shocks. This paper evaluates such performance of exchange rate, inflation and money targeting under terms of trade, real interest rate, foreign inflation and money demand shocks.

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Format: PDF | Size: 4,086KB | Date: Dec 2000 | Pages: 34


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