Interactions between monetary policy and exchange rate in inflation targeting emerging countries: the case of three East Asian countries
AbstractThis paper investigates empirically how the reaction of monetary policy to exchange rate has changed after the adoption of inflation targeting regime in three East Asian countries. Using a structural VAR and single equation methods, this study shows that the reactions of monetary policy to exchange rate shocks as well as CPI (demand shocks) and output (supply shocks) have declined under the inflation targeting environment. The policy function reacts weakly to the exchange rate movements before and after the financial crisis of 1997 in two out of the three countries.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 12034.
Date of creation: 2008
Date of revision: 09 Dec 2008
exchange rate; inflation targeting; policy reaction function;
Find related papers by JEL classification:
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-14 (All new papers)
- NEP-CBA-2008-12-14 (Central Banking)
- NEP-IFN-2008-12-14 (International Finance)
- NEP-MAC-2008-12-14 (Macroeconomics)
- NEP-MON-2008-12-14 (Monetary Economics)
- NEP-OPM-2008-12-14 (Open Economy Macroeconomic)
- NEP-SEA-2008-12-14 (South East Asia)
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