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Interest Rate Targeting in a Small Open Economy : The Predetermined Exchange Rates Case / Guillermo Calvo, Carlos Végh Gramont.
- Format:
- Book
- Government document
- Author/Creator:
- Calvo, Guillermo.
- Series:
- IMF Working Papers; Working Paper ; No. 1990/021
- IMF Working Papers
- Language:
- English
- Physical Description:
- 1 online resource (32 pages)
- Place of Publication:
- Washington, D.C. : International Monetary Fund, 1990.
- Language Note:
- English
- Summary:
- An important hurdle in analyzing interest rate targeting is that standard models usually lead to price level or inflation rate indeterminacy. This paper develops a simple framework in which such problems do not arise because the bonds whose interest rate is controlled provide liquidity services. This framework is used to examine interest rate targeting in a small open economy under predetermined exchange rates. A permanent increase in the interest rate has no real effects. In contrast, a temporary increase in the interest rate leads to higher consumption and to a current account deficit that worsens over time.
- Notes:
- Bibliographic Level Mode of Issuance: Monograph
- Description based on print version record.
- ISBN:
- 9781455257522
- 1455257524
- 9781462390441
- 1462390447
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