Hidden Bibliographic Details
| Other authors / contributors: | Prasad, Eswar S., 1965- author.
Zhang, Boyang, author.
International Monetary Fund. Institute for Capacity Development.
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| ISBN: | 1513572571
9781513572574
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| ISSN: | 1018-5941
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| Notes: | "September 2015."
"Institute For Capacity Development."
Includes bibliographical references (pages 27-29).
Description based on online resource; title from pdf title page (IMF.org Web site, viewed October 7, 2015).
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| Summary: | In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We analyze this result in the context of developing economies, where a large proportion of households are credit constrained and the share of food expenditures in total consumption expenditures is high. We develop an open economy model with incomplete financial markets to show that headline inflation targeting improves welfare outcomes. We also compute the optimal price index, which includes a positive weight on food prices but, unlike headline inflation, assigns zero weight to import prices.
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| Standard no.: | 10.5089/9781513572574.001
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