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Alternative economic policy under a regime with inflation targeting, primary surpluses and a floating exchange rate: an analysis for developing economies

Author

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  • Ricardo Ramalhete Moreira

    (Professor of Economics, Federal University of Espírito Santo, Brazil)

Abstract

Inflation targeting, primary surpluses and a floating exchange rate under supply and exchange-rate shocks can combine to create deleterious effects on the economic dynamic. This paper reports on computer simulation experiments using a dynamic and stochastic model that can incorporate different restrictions. In general, the data show that under supply and exchange-rate shocks, a better method for minimising social loss includes flexible inflation targeting, counter-cyclical primary surpluses and capital control without eliminating the floating exchange rate.

Suggested Citation

  • Ricardo Ramalhete Moreira, 2018. "Alternative economic policy under a regime with inflation targeting, primary surpluses and a floating exchange rate: an analysis for developing economies," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 15(1), pages 71-90, April.
  • Handle: RePEc:elg:ejeepi:v:15:y:2018:i:1:p71-90
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    More about this item

    Keywords

    inflation targeting; primary surpluses; exchange-rate fluctuation;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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