Advanced Search
MyIDEAS: Login

Central Bank Preferences, Distribution Forecasts and Economic Stability in a Small Open-economy

Contents:

Author Info

  • Alessandro Flamini

    ()
    (Department of Economics, The University of Sheffield)

Abstract

This paper relates the central bank's preferences on the inflation index and on the degree of smoothness of the interest rate to the quality of its forecasts and the expected perturbing impact of several shocks. The framework is a Markov jump-linear-quadratic system for optimal policy with model uncertainty in a timeless perspective. Comparing CPI and domestic inflation targeting, the latter implies considerably less variability in the distribution forecast of the economic dynamics. Furthermore, domestic inflation targeting stands out for much less sensitiveness to interest rate smoothing, and for resulting in more expected economic stability. Importantly, domestic inflation targeting allows significantly improving the prediction accuracy of the interest rate behaviour.

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://shef.ac.uk/content/1/c6/09/50/61/SERP2009005.pdf
Our checks indicate that this address may not be valid because: 404 Not Found (http://shef.ac.uk/content/1/c6/09/50/61/SERP2009005.pdf [301 Moved Permanently]--> https://www.sheffield.ac.uk/content/1/c6/09/50/61/SERP2009005.pdf). If this is indeed the case, please notify (Georgios Efthyvoulou)
File Function: First version, 2009
Download Restriction: no

Bibliographic Info

Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2009005.

as in new window
Length: 42 pages
Date of creation: Mar 2009
Date of revision: Mar 2009
Handle: RePEc:shf:wpaper:2009005

Contact details of provider:
Postal: 9 Mappin Street, SHEFFIELD, S1 4DT
Phone: +44 114 222 3399
Fax: + 44 (0)114 222 3458
Email:
Web page: http://www.shef.ac.uk/economics
More information through EDIRC

Related research

Keywords: Inflation targeting; additive and multiplicative uncertainty; Markov jump linear quadratic systems; small open-economy; optimal monetary policy; central bank preferences;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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

Citations

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:shf:wpaper:2009005. 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: (Georgios Efthyvoulou).

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.