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Optimal Exchange Rate Stabilization in a Dollarized Economy with Inflation Targets

Batini, N, Levine, P and Pearlman, J Optimal Exchange Rate Stabilization in a Dollarized Economy with Inflation Targets .

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Abstract

We build a small open-economy model with partial dollarization–households hold wealth in domestic currency and a foreign currency as in Felices and Tuesta (2006). The degree of dollarization is endogenous to the extent of exchange rate stabilization by the central bank. We identify the optimal monetary policy response under com-mitment and discretion and assess the optimal degree of exchange rate stabilization inthis set up, drawing policy implications for countries that target inflation in economies of this kind.

Item Type: Other
Authors :
NameEmailORCID
Batini, NUNSPECIFIEDUNSPECIFIED
Levine, Pp.levine@surrey.ac.ukUNSPECIFIED
Pearlman, JUNSPECIFIEDUNSPECIFIED
Uncontrolled Keywords : E52, E37, E58, dollarized economies, optimal monetary policy, managed exchange rates, inflation-forecast-based rules
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:14
Last Modified : 17 May 2017 14:33
URI: http://epubs.surrey.ac.uk/id/eprint/818198

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