Commodity prices fluctuations and monetary policy in small open ecomomies

Increased volatility in the world prices of commodities such as oil and food which are basic imports for many countries has rekindled interest on the question of how monetary policy should best adjust to external commodity price movements. Recent studies have analyzed the issue in the New Keynesian...

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Autor principal:	Chang, Roberto
Formato:	Artículo
Lenguaje:	eng
Publicado:	Banco Central de Chile 2019
Materias:	PRODUCTOS BÁSICOS POLÍTICA MONETARIA ECONOMÍA KEYNESIANA
Acceso en línea:	https://hdl.handle.net/20.500.12580/3834
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spelling	oai-20.500.12580-38342021-04-24T11:11:05Z Commodity prices fluctuations and monetary policy in small open ecomomies Chang, Roberto PRODUCTOS BÁSICOS POLÍTICA MONETARIA ECONOMÍA KEYNESIANA Increased volatility in the world prices of commodities such as oil and food which are basic imports for many countries has rekindled interest on the question of how monetary policy should best adjust to external commodity price movements. Recent studies have analyzed the issue in the New Keynesian framework of Woodford (2003) and Galí (2008) adapted and extended to an open economy. As emphasized by Corsetti Dedola and Leduc (2010) optimal monetary policy must then balance at least two considerations. The first one is to counteract domestic distortions related to nominal price rigidities and price setting behavior. This is most critical in closed economies and as emphasized by Woodford (2003) often results in a prescription that monetary policy should aim at the stabilization of a producer price index (PPI). The second consideration is that it can be beneficial for a small economy to use monetary policy to stabilize an international relative price such as the real exchange rate or the terms of trade. 2019-11-01T00:06:39Z 2019-11-01T00:06:39Z 2014 Artículo 978-956-7421-50-3 https://hdl.handle.net/20.500.12580/3834 eng Series on Central Banking Analysis and Economic Policies no. 22 Attribution-NonCommercial-NoDerivs 3.0 Chile http://creativecommons.org/licenses/by-nc-nd/3.0/cl/ .pdf Sección o Parte de un Documento p. 19-50 application/pdf Banco Central de Chile
institution	Banco Central
collection	Banco Central
language	eng
topic	PRODUCTOS BÁSICOS POLÍTICA MONETARIA ECONOMÍA KEYNESIANA
spellingShingle	PRODUCTOS BÁSICOS POLÍTICA MONETARIA ECONOMÍA KEYNESIANA Chang, Roberto Commodity prices fluctuations and monetary policy in small open ecomomies
description	Increased volatility in the world prices of commodities such as oil and food which are basic imports for many countries has rekindled interest on the question of how monetary policy should best adjust to external commodity price movements. Recent studies have analyzed the issue in the New Keynesian framework of Woodford (2003) and Galí (2008) adapted and extended to an open economy. As emphasized by Corsetti Dedola and Leduc (2010) optimal monetary policy must then balance at least two considerations. The first one is to counteract domestic distortions related to nominal price rigidities and price setting behavior. This is most critical in closed economies and as emphasized by Woodford (2003) often results in a prescription that monetary policy should aim at the stabilization of a producer price index (PPI). The second consideration is that it can be beneficial for a small economy to use monetary policy to stabilize an international relative price such as the real exchange rate or the terms of trade.
format	Artículo
author	Chang, Roberto
author_facet	Chang, Roberto
author_sort	Chang, Roberto
title	Commodity prices fluctuations and monetary policy in small open ecomomies
title_short	Commodity prices fluctuations and monetary policy in small open ecomomies
title_full	Commodity prices fluctuations and monetary policy in small open ecomomies
title_fullStr	Commodity prices fluctuations and monetary policy in small open ecomomies
title_full_unstemmed	Commodity prices fluctuations and monetary policy in small open ecomomies
title_sort	commodity prices fluctuations and monetary policy in small open ecomomies
publisher	Banco Central de Chile
publishDate	2019
url	https://hdl.handle.net/20.500.12580/3834
work_keys_str_mv	AT changroberto commoditypricesfluctuationsandmonetarypolicyinsmallopenecomomies
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Commodity prices fluctuations and monetary policy in small open ecomomies

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