Stability and policy rules in emerging markets

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dc.contributor.author Goyal, Ashima
dc.contributor.author Tripathi, Shruti
dc.date.accessioned 2012-06-06T06:53:07Z
dc.date.available 2012-06-06T06:53:07Z
dc.date.issued 2012-06-06
dc.identifier.uri http://hdl.handle.net/2275/164
dc.description.abstract Stability results for an open economy DSGE adapted to an emerging market (SOEME) with a dualistic structure have the same structure as in the original model, but those derived for the simulated version turn out to impose no restriction on the coefficient of inflation, but rather a threshold on the coefficient of the output gap. Other rigidities, lags and some degree of backward looking behavior in the simulated SOEME model arising from its calibration to an emerging market, may be helping provide a nominal anchor. Estimation of a Taylor rule for India, simulations in the SOEME model itself and a variant with government debt, confirm the analytical result. Implications are, first, optimization can be as effective as following a monetary policy rule. Second, knowledge of the specific rigidities in an economy can give useful inputs for the design of policy—their effect on stability should be more carefully researched. en_US
dc.language.iso en en_US
dc.relation.ispartofseries WP;WP-2012-004
dc.subject DSGE en_US
dc.subject Emerging economy en_US
dc.subject Rigidities en_US
dc.subject Stability en_US
dc.subject Optimization en_US
dc.subject Taylor rule en_US
dc.title Stability and policy rules in emerging markets en_US
dc.type Working Paper en_US

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