Predetermined exchange rate, monetary targeting, and inflation targeting regimes
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Many works analyzing the Mundell–Fleming dictum compare the predetermined exchange rate regime and the monetary targeting regime under flexible exchange rates. Reflecting on the fact that many emerging market countries have shifted to the inflation targeting regime, this paper aims to extend the literature to include the latter. The results of our analysis show that the interest rule with an inflation target is superior (or at least equal) to the two above‐mentioned regimes in absorbing both real and monetary shocks.
- International Journal of Economic Theory
International Journal of Economic Theory 12(3), 233-256, 2016-09