Advanced Search
MyIDEAS: Login to save this article or follow this journal

Inflation targeting during asset and commodity price booms

Contents:

Author Info

  • Nicoletta Batini
  • Eugen Tereanu

Abstract

The recent global economic crisis originated in the midst of a commodity price boom that had triggered sharp increases in inflation in many world countries. The crisis also came in the context of a rally in asset prices and large domestic imbalances in the United States. This paper uses a small open-economy dynamic stochastic general equilibrum (DSGE) model to design the correct monetary policy response to a protracted supply shock, and examines how that response would change when many become credit constrained--like in a credit crunch--and when spending of those who can still borrow becomes very sensitive to the interest rates because of overleveraging. Using a version of the model with Kalman learning, the paper also evaluates the implications of a loss of target credibility, showing how rules must be adjusted when the authorities' commitment to the inflation target has been eroded. The appropriate response to future evolutions of the price of oil, including to large downward corrections from the current level, is also evaluated. Copyright 2010, Oxford University Press.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1093/oxrep/grp032
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Review of Economic Policy.

Volume (Year): 26 (2010)
Issue (Month): 1 (Spring)
Pages: 15-35

as in new window
Handle: RePEc:oup:oxford:v:26:y:2010:i:1:p:15-35

Contact details of provider:
Web page: http://oxrep.oupjournals.org/

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. José de Gregorio, 2012. "Commodity Prices, Monetary Policy and Inflation," Working Papers wp359, University of Chile, Department of Economics.
  2. Cristi Spulbar & Adriana Spinu & Mihai Nitoi, 2012. "Financial Stability And Price Stability: An Empirical Analysis In Euro Area," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 220-229, December.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:oup:oxford:v:26:y:2010:i:1:p:15-35. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.