English, Article, Journal or magazine article edition: Monetary Rules for Emerging Market Economies Fabio Ghironi; Alessandro Rebucci

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Bookmark: http://trove.nla.gov.au/version/73020
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Monetary Rules for Emerging Market Economies
Author
  • Fabio Ghironi
  • Alessandro Rebucci
Physical Description
  • preprint
Notes
  • We compare the performance of a currency board, inflation targeting, and dollarization in a small, open developing economy with a liberalized capital account. We focus on the transmission of shocks to currency and country risk premia and on the role of fluctuations in premia in the propagation of other shocks. We calibrate our model on Argentina. The framework matches the second moments of key variables well. Welfare analysis suggests that dollarization is preferable to alternative regimes because it removes currency premium volatility. However, a currency board can match dollarization on welfare grounds if the central bank holds a sufficiently large stock of foreign reserves.
  • Monetary policy , Argentina , Emerging markets , Business cycles , Exchange risk , Social policy , Economic models ,
  • RePEc:imf:imfwpa:02/​34
  • We compare the performance of a currency board arrangement, inflation targeting, and dollarization in a small open, developing economy with liberalized capital account. We focus explicitly on the transmission of shocks to currency and country risk premia in international financial markets and on the role of fluctuations in premia in the propagation of other shocks. We calibrate our model on Argentina. The framework fits the data relatively well in that it matches the second moments of several key macro variables. Welfare analysis suggests that dollarization is preferable to the alternative regimes we consider because it removes the volatility that originates from the currency premium. However, a currency board can match dollarization if the central bank holds a sufficiently large stock of foreign reserves on average.
  • Argentina; Business cycles; Emerging markets; Monetary rules; Risk premium; Welfare
  • RePEc:boc:bocoec:476
Language
  • English
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