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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, 2008. "Do Central Banks Respond to Exchange Rate Movements? Some New Evidence from Structural Estimation," Staff Working Papers 08-24, Bank of Canada.
  2. Gill Hammond, 2012. "State of the art of inflation targeting," Handbooks, Centre for Central Banking Studies, Bank of England, edition 4, number 29, March.
  3. 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.
  4. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
  5. Lubik, Thomas A. & Schorfheide, Frank, 2007. "Do central banks respond to exchange rate movements? A structural investigation," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1069-1087, May.
  6. RUGE-MURCIA, Francisco J., 2009. "Do Inflation-Targeting Central Banks Implicitly Target the Price Level?," Cahiers de recherche 16-2009, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  7. Daniel Buncic & Martin Melecky, 2008. "An Estimated New Keynesian Policy Model for Australia," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 1-16, 03.
  8. 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.
  9. Paul Levine & Peter McAdam & Joseph Pearlman, 2007. "Inflation-Forecast-Based Rules and Indeterminacy: A Puzzle and a Resolution," International Journal of Central Banking, International Journal of Central Banking, vol. 3(4), pages 77-110, December.
  10. Vladimir Klyuev & Heesun Kiem & Ondrej Kamenik & Douglas Laxton, 2008. "Why is Canada’s Price Level So Predictable?," IMF Working Papers 08/25, International Monetary Fund.
  11. 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.
  12. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  13. 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.
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