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Inflation Targeting Lite' in Small Open Economies; The Case of Mauritius

  • International Monetary Fund
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    This paper develops a new macrofinance model for small open economies, allowing the investigation of Mauritius's experience with 'inflation targeting lite' as described in Stone (2003). It finds that this monetary policy regime has been associated with a general reduction in inflation, principally through a reduction in inflation expectations. The credibility the Bank of Mauritius has established with its 'inflation targeting lite' regime has allowed it to shift from an emphasis on exchange rate targeting towards inflation targeting. By estimating a model in which the yield curve is modeled explicitly we are able to obtain estimates of inflation expectations.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=18346
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/172.

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    Length: 25
    Date of creation: 01 Sep 2005
    Date of revision:
    Handle: RePEc:imf:imfwpa:05/172
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    1. GlennD. Rudebusch & Tao Wu, 2008. "A Macro-Finance Model of the Term Structure, Monetary Policy and the Economy," Economic Journal, Royal Economic Society, vol. 118(530), pages 906-926, 07.
    2. Eric Parrado, 2004. "Inflation Targeting and Exchange Rate Rules in an Open Economy," IMF Working Papers 04/21, International Monetary Fund.
    3. Frederic S. Mishkin, 2004. "Can Inflation Targeting Work in Emerging Market Countries?," NBER Working Papers 10646, National Bureau of Economic Research, Inc.
    4. Gaston Gelos & Alessandro Prati & Oya Celasun, 2004. "Obstacles to Disinflation: What is the Role of Fiscal Expectations?," IMF Working Papers 04/111, International Monetary Fund.
    5. Peter Hoerdahl & Oreste Tristani, 2004. "A joint econometric model of macroeconomic and term structure dynamics," Econometric Society 2004 North American Summer Meetings 379, Econometric Society.
    6. Galí, Jordi & Monacelli, Tommaso, 2002. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," CEPR Discussion Papers 3346, C.E.P.R. Discussion Papers.
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