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Ex ante Dynamics of Real Effects of Monetary Policy: Theory and Evidence for Poland and Russia, 2001–2003

  • Wojciech W Charemza

    ()

    ([1] National Bank of Poland, BBM, Warsaw, Poland [2] University of Leicester, Leicester, UK.)

  • Svetlana Makarova

    ([1] National Bank of Poland, BBM, Warsaw, Poland [2] European University at St Petersburg, St Petersburg, Russia)

This paper proposes a new indicator of the expected real effects of an inflation-targeting monetary policy. This indicator can be derived from a simple two-dimensional vector autoregressive model of inflation and the output gap. A simulation experiment illustrates its rationale for timing monetary decisions, if the control of output is a secondary policy target. Applied for Poland, this might have contributed to a policy that would have reduced Polish inflation in 2003 and increased output growth in 2004. We also show how this indicator can be applied for RussiaComparative Economic Studies (2006) 48, 458–479. doi:10.1057/palgrave.ces.8100180

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Article provided by Palgrave Macmillan & Association for Comparative Economic Studies in its journal Comparative Economic Studies.

Volume (Year): 48 (2006)
Issue (Month): 3 (September)
Pages: 458-479

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Handle: RePEc:pal:compes:v:48:y:2006:i:3:p:458-479
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  1. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  2. Huw Dixon & Engin Kara, 2007. "Persistence and Nominal Inertia in a Generalized Taylor Economy: How Longer Contracts Dominate Shorter Contracts," Discussion Papers 07-01, Department of Economics, University of Birmingham.
  3. Ascari, Guido, 2000. "Optimising Agents, Staggered Wages and Persistence in the Real Effects of Money Shocks," Economic Journal, Royal Economic Society, vol. 110(465), pages 664-86, July.
  4. Uhlig, Harald, 2005. "What are the effects of monetary policy on output? Results from an agnostic identification procedure," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 381-419, March.
  5. Quah, Danny, 1995. "Measuring Core Inflation," CEPR Discussion Papers 1153, C.E.P.R. Discussion Papers.
  6. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," Econometrica, Econometric Society, vol. 68(5), pages 1151-1180, September.
  7. Coenen, Guenter & Wieland, Volker, 2003. "A Small Estimated Euro Area Model with Rational Expectations and Nominal Rigidities," CFS Working Paper Series 2003/08, Center for Financial Studies (CFS).
  8. Danny Quah & Danny Quah & Shaun P. Vahey, 1995. "Measuring Core Inflation," CEP Discussion Papers dp0254, Centre for Economic Performance, LSE.
  9. repec:nbr:nberre:0126 is not listed on IDEAS
  10. Arrazola, Maria & de Hevia, Jose, 2002. "An alternative measure of core inflation," Economics Letters, Elsevier, vol. 75(1), pages 69-73, March.
  11. Gert Wehinger, 2000. "Causes of Inflation in Europe, the United States and Japan: Some Lessons for Maintaining Price Stability in the EMU from a Structural VAR Approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 27(1), pages 83-107, March.
  12. Mankiw, N. Gregory & Reis, Ricardo, 2002. "What measure of inflation should a central bank target?," Working Paper Series 0170, European Central Bank.
  13. Christine Gartner & Gert Wehinger, 1998. "Core Inflation in Selected European Union Countries," Working Papers 33, Oesterreichische Nationalbank (Austrian Central Bank).
  14. Hahn, Elke, 2002. "Core inflation in the Euro area: Evidence from the structural VAR approach," CFS Working Paper Series 2001/09, Center for Financial Studies (CFS).
  15. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
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