Inflation targeting in a small open economy: Empirical results for Switzerland
AbstractThis paper extends McCallum?s (1987) nominal targeting rule to a small open economy by allowing for feedback from the exchange rate. Instead of setting parameters in a McCallum-type targeting rule and simulating, the parameters are estimated using a markov switching model. We argue that a model of discrete parameter changes should be adept at capturing sudden changes in policy regime, such as changes in the degree to which monetary policy admits feedback from the exchange rate. We examine the legitimacy of an inflation targeting rule with occasional exchangerate feedback to describe Swiss monetary policy over the past twenty years.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Monetary Economics.
Volume (Year): 37 (1996)
Issue (Month): 1 (February)
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Web page: http://www.elsevier.com/locate/inca/505566
Other versions of this item:
- Michael Dueker & Andreas M. Fischer, 1995. "Inflation targeting in a small open economy: empirical results for Switzerland," Working Papers 1995-014, Federal Reserve Bank of St. Louis.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bennett T. McCallum, 1994. "Specification and Analysis of a Monetary Policy Rule for Japan," NBER Working Papers 4449, National Bureau of Economic Research, Inc.
- Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
- Kim, Chang-Jin, 1994.
"Dynamic linear models with Markov-switching,"
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Elsevier, vol. 60(1-2), pages 1-22.
- Christian Vital & David L. Mengle, 1988. "SIC: Switzerland's new electronic interbank payment system," Economic Review, Federal Reserve Bank of Richmond, issue Nov, pages 12-27.
- Bennett T. McCallum, 1987. "The case for rules in the conduct of monetary policy: a concrete example," Economic Review, Federal Reserve Bank of Richmond, issue Sep, pages 10-18.
- Mccallum, Bennet T., 1988. "Robustness properties of a rule for monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 173-203, January.
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