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Optimal monetary policy regime for oil producing developing economies: Implications for post-war Iraq

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  • Tas, Bedri Kamil Onur
  • Togay, Selahattin

Abstract

This paper theoretically investigates optimal monetary policy regime for oil producing developing countries. We analyze credibility and reputation of the Central Bank and macroeconomic dynamics under alternative monetary policy regimes. We construct a detailed and realistic model that can be used to analyze macroecomic structure and expectation dynamics of an oil producing open economy. We take into account the asymmetric information between the public and the central bank and theoretically investigate how this asymmetric information impacts the real economy and the credibility of the central bank. The simulation results indicate that central bank achieves higher credibility and lower inflation under dollarization and higher output levels under currency board regime. The model constructed in this paper has many policy implications for oil producing open economies. Using the implications of the model, we make monetary policy regime recommendations for post-war Iraq.

Suggested Citation

  • Tas, Bedri Kamil Onur & Togay, Selahattin, 2010. "Optimal monetary policy regime for oil producing developing economies: Implications for post-war Iraq," Economic Modelling, Elsevier, vol. 27(5), pages 1324-1336, September.
  • Handle: RePEc:eee:ecmode:v:27:y:2010:i:5:p:1324-1336
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    References listed on IDEAS

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    Cited by:

    1. Almukhtar Saif Al-Abri, 2014. "Labor Market Heterogeneity and Optimal Exchange Rate Regime in Resource-Rich MENA Countries," Working Papers 844, Economic Research Forum, revised Oct 2014.
    2. Al-Abri, Almukhtar Saif, 2014. "Optimal exchange rate policy for a small oil-exporting country: A dynamic general equilibrium perspective," Economic Modelling, Elsevier, vol. 36(C), pages 88-98.

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