Global Commodity Prices, Monetary Transmission, and Exchange Rate Pass-Through in the Pacific Islands / Shanaka Peiris, Ding Ding.

Format:

Book

Government document

Author/Creator:

Peiris, Shanaka.

Contributor:

Ding, Ding.

Series:

IMF Working Papers; Working Paper ; No. 2012/176

IMF Working Papers

Language:

English

Subjects (All):

Foreign exchange rates--Islands of the Pacific.

Foreign exchange rates.

Commercial products--Islands of the Pacific.

Commercial products.

Monetary policy--Islands of the Pacific.

Monetary policy.

Physical Description:

1 online resource (17 p.)

Place of Publication:

Washington, D.C. : International Monetary Fund, 2012.

Language Note:

English

Summary:

Pacific Islands countries are vulnerable to commodity price shocks, and this poses challenges to monetary policy. The high degree of exchange rate pass-through to headline inflation and the weak monetary transmission mechanism in PICs suggest a greater efficacy of exchange rate changes in affecting inflation rather than monetary policy. To assess the tradeoff between the use of the exchange rate and monetary policy in macroeconomic stabilization, we employ a model-based approach to examine the optimal policy in response to the historical distribution of exogenous shocks in a Pacific Island (Tonga). The empirical evidence and model simulations tilt in the favor of exchange rate policy given the close relationship between exchange rate changes and headline inflation and the low interest rate sensitivity of aggregate demand.

Contents:

Cover; Contents; I. Introduction; II. The Choice of a Nominal Anchor; III. Monetary and Exchange Transmission Mechanisms; IV. FPAS Model for Small Island Countries; V. Policy Implications; Appendix I. Identification of VAR; References

Notes:

Description based upon print version of record.

Includes bibliographical references.

Description based on print version record.

ISBN:

9781475585810

1475585810

9781475562194

1475562195