1.

Record Nr.

UNINA9910788348703321

Autore

Batini Nicoletta

Titolo

“What Should Inflation Targeting Countries Do When Oil Prices Rise and Drop Fast?” / / Nicoletta Batini, Eugen Tereanu

Pubbl/distr/stampa

Washington, D.C. : , : International Monetary Fund, , 2009

ISBN

1-4623-9512-0

1-4527-1778-8

9786612843167

1-4518-7248-8

1-282-84316-8

Descrizione fisica

1 online resource (34 p.)

Collana

IMF Working Papers

Altri autori (Persone)

TereanuEugen

Soggetti

Petroleum products - Prices

Inflation (Finance)

Banks and Banking

Investments: Energy

Inflation

Macroeconomics

Money and Monetary Policy

Price Level

Deflation

Energy: Demand and Supply

Prices

Energy: General

Monetary Policy

Banks

Depository Institutions

Micro Finance Institutions

Mortgages

Investment & securities

Monetary economics

Banking

Oil prices

Oil

Inflation targeting

Petroleum industry and trade

Monetary policy

Banks and banking



United States

Lingua di pubblicazione

Inglese

Formato

Materiale a stampa

Livello bibliografico

Monografia

Note generali

Description based upon print version of record.

Nota di bibliografia

Includes bibliographical references.

Nota di contenuto

Contents; I. Introduction; Tables; 1. Oil Price Developments; II. Relevant Literature; III. Methodology, Data and Calibration; IV. Optimal Policy Responses and Optimal Horizons to a 2000s-Type Supply Shock; A. Optimal Policy Responses under a 2000s-Type Oil Shock; 2. Welfare Statistics-Various Oil Regimes; B. Optimal Horizons for a 2000s-Type Oil Shock; 3. Optimal Policy Horizons Under Alternative Oil Regimes; 4. Optimal Policy Horizons Under Alternative Oil Regimes (α = 0.3); V. Optimal Rules Under Imperfect Credibility; 5. Optimal Feedback Horizons Under Alternative Oil Regimes

VI. Bracing for Future ShocksVII. Concluding Remarks and Policy Implimentations; 6. Optimized Feedback Coefficients Under Three Alternative Future Oil Scenarios; References

Sommario/riassunto

After a long period of global price stability, in 2008 inflation increased sharply following unprecedented increases in the price of oil and other commodities, notably food. Although inflation remained lower and growth higher in inflation targeting countries than elsewhere, almost everywhere price stability seemed in jeopardy as consumer prices kept surging and central banks struggled to maintain expectations anchored. The rapid drop in energy and food prices that later accompanied the world slowdown helped avert the worse, but inflation stayed high in many inflation targeting countries. This paper uses a small open-economy DSGE model to design the correct monetary policy response to a protracted supply shock of the kind observed today, and explains how to choose optimal policy horizons under such shock. Using a version of the model with Kalman learning, the paper also evaluates the implications of a loss of target credibility, showing how rules must be adjusted when the authorities' commitment to low inflation has been eroded. The appropriate response to future evolutions of the price of oil, including to a large downward correction as recently observed, is also evaluated.