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The Performance of Targeting Monetary Policies in a Small Open Economy

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Authors
Nam, Kwanghee
Issue Date
2005
Publisher
Seoul Journal of Economics
Citation
Seoul Journal of Economics 18 (No. 2 2005): 147-172
Keywords
Targeting monetary policyInflation targeting
Abstract
This paper examines the performance of targeting monetary policies in a dynamic optimizing model. Towards this end I develop a small open economy version of the New Keynesian model and calibrate it to the recent Korean data. By modeling the central bank as an optimizing agent with explicit weights on different components of the objective function, I explore the consequences of alternative specifications of the central bank's objectives. Policy simulations include variations on inflation targeting, nominal income growth targeting and exchange rate targeting. Simulation results suggest that inflation targeting is preferable to nominal income growth and exchange rate pegging in smoothing out fluctuations in inflation and the output-gap.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/1335
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.18(2) (Summer 2005)
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