Endogenous Monetary Policy Credibility in a Small Macro Model of Israel
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
This paper extends a small linear model of the Israeli economy to allow for nonlinearities in the inflation-output process that arise from convexity in the Phillips curve and endogenous monetary policy credibility. We find that the dynamic responses to shocks in the extended model more closely resemble features in the data from the period 2001?03. In particular, the extended model does a much better job in accounting for the deterioration in monetary policy credibility and the output costs of regaining monetary policy credibility once it has been lost.
Series:
Working Paper No. 2007/207
Subject:
Central bank policy rate Exchange rates Inflation Inflation targeting Output gap
English
Publication Date:
August 1, 2007
ISBN/ISSN:
9781451867718/1018-5941
Stock No:
WPIEA2007207
Pages:
33
Please address any questions about this title to publications@imf.org