English, Article, Journal or magazine article edition: Balance of Payments Crises Under Inflation Targeting Michael Kumhof; Shujing Li; Isabel K. Yan

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Bookmark: http://trove.nla.gov.au/version/143082
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Balance of Payments Crises Under Inflation Targeting
Author
  • Michael Kumhof
  • Shujing Li
  • Isabel K. Yan
Physical Description
  • preprint
Notes
  • July 2000 (Revised) The paper analyzes an open economy where fiscal deficits are incompatible with an inflation target, ultimately leading to a speculative attack. There are two differences to the exchange rate targeting case: (i) The attack takes place over a short period of time as opposed to instantaneously. (ii) Reserve losses attributable to the attack are smaller, and increasing in the share of tradable goods in total consumption. 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 -->
  • intellectual property rights, copyright, sui generis protection of expressive material, economics of information-goods, open science
  • RePEc:wop:stanec:00020
  • This paper analyzes a small open economy model under inflation targeting. It shows why such a monetary regime is vulnerable to speculative attacks that take place over a short period rather than instantaneously. The speed at which the regime collapses, and the extent of reserve losses, are increasing in the central bank's explicit or implicit commitment to intervene in the foreign exchange market. Attacks are therefore ranked, from most to least severe, as follows: Exchange rate targeting, CPI inflation targeting, domestic nontradables inflation targeting, and money targeting. Under inflation targeting the size of the attack is increasing in the tradables consumption share.
  • Balance of payments deficits , Inflation targeting , Exchange rate policy , Foreign exchange , Intervention , Economic models ,
  • RePEc:imf:imfwpa:07/​84
Language
  • English
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