Interest Rate Targeting in a Small Open Economy : The Predetermined Exchange Rates Case /

An important hurdle in analyzing interest rate targeting is that standard models usually lead to price level or inflation rate indeterminacy. This paper develops a simple framework in which such problems do not arise because the bonds whose interest rate is controlled provide liquidity services. Thi...

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Bibliografiske detaljer
Hovedforfatter: Calvo, Guillermo
Andre forfattere: Vegh Gramont, Carlos
Format: Tidsskrift
Sprog:English
Udgivet: Washington, D.C. : International Monetary Fund, 1990.
Serier:IMF Working Papers; Working Paper ; No. 1990/021
Online adgang:Full text available on IMF
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100 1 |a Calvo, Guillermo. 
245 1 0 |a Interest Rate Targeting in a Small Open Economy :   |b The Predetermined Exchange Rates Case /  |c Guillermo Calvo, Carlos Vegh Gramont. 
264 1 |a Washington, D.C. :  |b International Monetary Fund,  |c 1990. 
300 |a 1 online resource (32 pages) 
490 1 |a IMF Working Papers 
500 |a <strong>Off-Campus Access:</strong> No User ID or Password Required 
500 |a <strong>On-Campus Access:</strong> No User ID or Password Required 
506 |a Electronic access restricted to authorized BRAC University faculty, staff and students 
520 3 |a An important hurdle in analyzing interest rate targeting is that standard models usually lead to price level or inflation rate indeterminacy. This paper develops a simple framework in which such problems do not arise because the bonds whose interest rate is controlled provide liquidity services. This framework is used to examine interest rate targeting in a small open economy under predetermined exchange rates. A permanent increase in the interest rate has no real effects. In contrast, a temporary increase in the interest rate leads to higher consumption and to a current account deficit that worsens over time. 
538 |a Mode of access: Internet 
700 1 |a Vegh Gramont, Carlos. 
830 0 |a IMF Working Papers; Working Paper ;  |v No. 1990/021 
856 4 0 |z Full text available on IMF  |u http://elibrary.imf.org/view/journals/001/1990/021/001.1990.issue-021-en.xml  |z IMF e-Library