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Inflation Targeting and Exchange Rate Flexibility

Author

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  • Michael Kumhof

Abstract

December 2000 This paper evaluates the performance of exchange rate, inflation and money targeting under terms of trade, real interest rate, foreign inflation and money demand shocks. Inflation targeting must target the price level as opposed to forward looking inflation for uniqueness of perfect foresight equilibria. Its performance is very similar to exchange rate targeting. Money targeting displays real exchange rate flexibility in response to foreign shocks, while exchange rate and inflation targeting permit accommodation of money demand shocks. Because of distortions temporary output booms are generally welfare improving, which makes welfare rankings among policies dependent on the direction of shocks Keywords: intellectual property rights, copyright, sui generis protection of expressive material, economics of information-goods, open science, "fair use," scientific databases. JEL Classification: H4, K39, O31, O34 -->

Suggested Citation

  • Michael Kumhof, 2000. "Inflation Targeting and Exchange Rate Flexibility," Working Papers 00023, Stanford University, Department of Economics.
    • Handle: RePEc:wop:stanec:00023
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    File URL: http://www-econ.stanford.edu/faculty/workp/swp00023.pdf
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    More about this item

    Keywords

    intellectual property rights; copyright; sui generis protection of expressive material; economics of information-goods; open science;
    All these keywords.

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • K39 - Law and Economics - - Other Substantive Areas of Law - - - Other
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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