Exchange Rate Targeting in a Small Open Economy

Número: 
367
Publicado: 
Clasificación JEL: 
E52, F41
Palabras clave: 
Flexible inflation targeting, Exchange Rates, Fear of floating

The paper develops a New Keynesian Small Open Economy Model characterized by external habit formation and Calvo price setting with dynamic inflation updating. The model is used to analyze the effect of nominal ex-change rate targeting on optimal policy an