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Open-Economy Inflation Targeting

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  • Svensson, L.E.O.

Abstract

The paper extends previous analysis of closed-economy inflation targeting to a small open economy with forward-looking aggregate supply and demand with some microfoundations, and with stylized realistic lags in the different transmission channels for monetary policy. The paper compares targeting of CPI and domestic inflation, strict and flexible inflation targeting, and inflation-targeting reaction functions and the Talyor rule. The optimal monetary policy response to several different shocks is examined.

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Bibliographic Info

Paper provided by Stockholm - International Economic Studies in its series Papers with number 638.

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Length: 50 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:fth:stocin:638

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Keywords: INFLATION ; MONETARY POLICY ; CENTRAL BANKS;

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References

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