Distributional Effects of Monetary Policy in Emerging Market Economies / Eswar Prasad, Boyang Zhang.

Format:

Book

Author/Creator:

Prasad, Eswar.

Contributor:

Zhang, Boyang.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21471.

NBER working paper series no. w21471

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

We develop a two-sector, heterogeneous-agent model with incomplete financial markets to study the distributional effects and aggregate welfare implications of alternative monetary policy rules in emerging market economies. Relative to inflation targeting, exchange rate management benefits households in the tradable goods sector but in the long run these households are worse off due to higher consumption volatility. A fixed exchange rate reduces the welfare of these households and aggregate welfare when the economy is hit by positive shocks to nontradable goods productivity or foreign interest rates. Fiscal policy can more efficiently achieve similar short-run distributional objectives as exchange rate management.

Notes:

Print version record

August 2015.