World Food Prices, the Terms of Trade-Real Exchange Rate Nexus, and Monetary Policy Roberto Chang

ISBN: 9781299677999

Published: January 1st 2013

ebook

65 pages


Description

World Food Prices, the Terms of Trade-Real Exchange Rate Nexus, and Monetary Policy  by  Roberto Chang

World Food Prices, the Terms of Trade-Real Exchange Rate Nexus, and Monetary Policy by Roberto Chang
January 1st 2013 | ebook | PDF, EPUB, FB2, DjVu, audiobook, mp3, ZIP | 65 pages | ISBN: 9781299677999 | 8.34 Mb

How should monetary policy respond to large fluctuations in world food prices? We study this question in an open economy model in which imported food has a larger weight in domestic consumption than abroad and international risk sharing can beMoreHow should monetary policy respond to large fluctuations in world food prices?

We study this question in an open economy model in which imported food has a larger weight in domestic consumption than abroad and international risk sharing can be imperfect. A key novelty is that the real exchange rate and the terms of trade can move in opposite directions in response to world food price shocks. This exacerbates the policy trade-off between stabilizing output prices vis a vis the real exchange rate, to an extent that depends on risk sharing and the price elasticity of exports.

Under perfect risk sharing, targeting the headline CPI welfare-dominates targeting the PPI if the variance of food price shocks is not too small and the export price elasticity is realistically high. In such a case, however, targeting forecast CPI is a superior choice. With incomplete risk sharing, PPI targeting is clearly a winner.



Enter the sum





Related Archive Books



Related Books


Comments

Comments for "World Food Prices, the Terms of Trade-Real Exchange Rate Nexus, and Monetary Policy":


panda-antywirus.pl

©2012-2015 | DMCA | Contact us