Supply Shocks in the Transition Towards an Inflation Targeting Reform: an Empirical Evidence for Guatemala
AbstractSupply shock effects comming from high import prices, such as the current oil price shock, are analyzed based on a dynamic semi-structural model calibrated for the Guatemalan economy. It is argued that a worldwide oil price increase affects domestic prices through a direct and an indirect channel. The former derives from the direct import of petroleum related products, which become more expensive, while the latter channel derives from the import of commodities whose production costs involve expenditures on any petroleum derivative product. In addition, three different central bank monetary policy responses to the oil shock namely a passive position, an output targeting policy, and inflation targeting are simulated and their results are compared. It is concluded that an inflation targeting regime, which is expected to be fully functioning in Guatemala by 2006 would be a better monetary policy response to contrarrest the negative effects of an oil shock, rather than the output targeting policy that is currently being undertaken.
Download InfoIf 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.
Bibliographic InfoPaper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 354.
Date of creation: Dec 2005
Date of revision:
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral 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: (Claudio Sepulveda).
If references are entirely missing, you can add them using this form.