Kiel Working Papers, Kiel Institute for World Economics
No 1170:
Comparing Monetary Policy Strategies: Towards a Generalized Reaction Function
Felix Hammermann
Abstract: There seems to be no consensus in the literature with
respect to monetary policy strategies in combination with flexible exchange
rate regimes. Therefore, this paper determines what the alternative
strategies inflation targeting, Taylor rule, monetary conditions index, and
managed floating have in common. The fact that all strategies build on
reaction functions which use the short-term interest rate as an important
or even the single monetary policy instrument allows a generalized reaction
function for all strategies to be derived. Future research may use such a
generalized reaction function for describing and determining monetary
policy in emerging market economies with flexible exchange rate regimes.
Keywords: Monetary Policy, Inflation Targeting, Taylor Rule, Monetary Conditions Index, Managed Floating; (follow links to similar papers)
JEL-Codes: E52,; E58,; E42; (follow links to similar papers)
28 pages, June 2003
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