Monetary policy under commodity price fluctuations

Research output: Contribution to journalArticlepeer-review

Abstract

This paper discusses monetary policy in a New Keynesian open economy subject to commodity price fluctuations. We review theoretical results that imply that stabilizing the producer price index (PPI) is optimal only under special circumstances. In a calibrated version of the model, PPI targeting is compared against a policy that stabilizes a forecast of the consumer price index. The results depend on model specifics, especially elasticities of substitution and the structure of international asset markets.

Original languageEnglish (US)
Pages (from-to)282-296
Number of pages15
JournalReview of Development Economics
Volume19
Issue number2
DOIs
StatePublished - May 1 2015
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Geography, Planning and Development
  • Development

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