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Calvo-type rules and the forward-looking behavior of inflation targeting central banks

  • Eurilton Araújo

    ()

    (Central Bank of Brazil and FUCAPE Business School)

  • Débora Gouveia

    ()

    (Insper Institute of Education and Research)

We estimate small open economy models in which inflation targeting central banks respond to a discounted infinite sum of expected inflation and output gaps (Calvo-type rules). The results support Calvo-type rules for Australia and Canada, and suggest longer targeting horizons for inflation compared with output gaps.

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File URL: http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I3-P192.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 33 (2013)
Issue (Month): 3 ()
Pages: 2042-2051

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Handle: RePEc:ebl:ecbull:eb-13-00474
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  1. Wei Dong, 2013. "Do central banks respond to exchange rate movements? Some new evidence from structural estimation," Canadian Journal of Economics, Canadian Economics Association, vol. 46(2), pages 555-586, May.
  2. Vasco J. Gabriel & Paul Levine & Christopher Spencer, 2008. "How forward-looking is the Fed? Direct estimates from a ‘Calvo-type’ rule," NIPE Working Papers 09/2008, NIPE - Universidade do Minho.
  3. Francisco Ruge-Murcia, 2014. "Do Inflation-Targeting Central Banks Implicitly Target the Price Level?," International Journal of Central Banking, International Journal of Central Banking, vol. 10(2), pages 301-326, June.
  4. Richard Clarida & Jordi Gali & Mark Gertler, 1997. "Monetary Policy Rules in Practice: Some International Evidence," NBER Working Papers 6254, National Bureau of Economic Research, Inc.
  5. Martin Melecky & Daniel Buncic, 2005. "An Estimated, New Keynesian Policy Model for Australia," Macroeconomics 0511026, EconWPA.
  6. Clarida, R. & Gali, J. & Gertler, M., 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory," Working Papers 98-01, C.V. Starr Center for Applied Economics, New York University.
  7. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  8. Levine, Paul & McAdam, Peter & Pearlman, Joseph G., 2006. "Inflation forecast-based-rules and indeterminacy: a puzzle and a resolution," Working Paper Series 0643, European Central Bank.
  9. GORDON de BROUWER & JAMES GILBERT, 2005. "Monetary Policy Reaction Functions in Australia," The Economic Record, The Economic Society of Australia, vol. 81(253), pages 124-134, 06.
  10. Ida Wolden Bache & Øistein Røislanda & Kjersti Næss Torstensen, 2011. "Interest Rate Smoothing and "Calvo-Type" Interest Rate Rules: A Comment on Levine, McAdam, and Pearlman (2007)," International Journal of Central Banking, International Journal of Central Banking, vol. 7(3), pages 79-90, September.
  11. Vladimir Klyuev & Heesun Kiem & Ondra Kamenik & Douglas Laxton, 2008. "Why is Canada's Price Level so Predictable?," IMF Working Papers 08/25, International Monetary Fund.
  12. Thomas Lubik & Frank Schorfheide, 2003. "Do Central Banks Respond to Exchange Rate Movements? A Structural Investigation," Economics Working Paper Archive 505, The Johns Hopkins University,Department of Economics.
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