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 language | English (US) |
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Pages (from-to) | 282-296 |
Number of pages | 15 |
Journal | Review of Development Economics |
Volume | 19 |
Issue number | 2 |
DOIs | |
State | Published - May 1 2015 |
Externally published | Yes |
All Science Journal Classification (ASJC) codes
- Geography, Planning and Development
- Development