A Monetary Policy Rule for Jamaica
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
Since 1996, the Bank of Jamaica (BoJ) has sought to limit changes in the exchange rate for the Jamaican dollar in the context of its efforts to maintain low inflation. However, with a persistently high public sector deficit, real interest rates have remained generally high, which partly explains the slow pace of growth. This paper discusses an alternative monetary policy mix for achieving low variance for inflation and output through the prism of an empirical macroeconomic model. The simulation results suggest that a monetary policy mix that takes into account the impact of policy on both inflation and output achieves lower variance for inflation and output compared with the current policy mix, which tilts somewhat toward exchange rate stabilization. A case, therefore, can be made for the BoJ to move to a soft inflation targeting regime supported by fiscal consolidation.
Series:
Working Paper No. 2005/041
Subject:
Exchange rate policy Exchange rates Inflation Inflation targeting Real exchange rates
English
Publication Date:
March 1, 2005
ISBN/ISSN:
9781451860603/1018-5941
Stock No:
WPIEA2005041
Pages:
19
Please address any questions about this title to publications@imf.org