I compare the relative merits of a policy of inflation targeting for small open economies with frictions in financial markets with an alternative floating regime that has a constant rate of domestic money growth. The differences between these two policies appear only in the dynamic properties of equilibria with credit rationing. When the probability of loan repayment is low, inflation targeting eliminates endogenous volatility when compared with a constant money growth, but equilibria remain indeterminate. When the probability of loan repayment is high, inflation targeting always improves on the stability of equilibria, and sometimes it also eliminates endogenous fluctuations.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Length: 37 pages Date of creation: Date of revision: Handle: RePEc:gua:wpaper:ec200903
Contact details of provider: Postal: UCEA-Campus Marfil, Fracc. I, El Establo, Guanajuato GTO 36250 Phone: [+52 473] 735 2925 x-2925 Fax: [+52 473] 735 2925 x-2925 Email: Web page: http://economia.ugto.org/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Daniel Ventosa-Santaularia).
Find related papers by JEL classification: E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy F31 - International Economics - - International Finance - - - Foreign Exchange F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
References listed on IDEAS 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.:
Reinhart, Carmen & Calvo, Guillermo, 2002.
"Fear of floating,"
MPRA Paper
14000, University Library of Munich, Germany.
[Downloadable!]
Guillermo A. Calvo & Carmen M. Reinhart, 2000.
"Fear of Floating,"
NBER Working Papers
7993, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Valerie R. Bencivenga & Elisabeth Huybens & Bruce D. Smith, 2002.
"What to stabilize in the open economy,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1289-1307, November.
[Downloadable!] (restricted)