Home

WP 2008-04: Optimal Exchange Rate Stabilization in a Dollarized Economy with Inflation Targets

WP 2008-04
TitleOptimal Exchange Rate Stabilization in a Dollarized Economy with Inflation Targets
Author(s) Nicoletta Batini
Language English
Date 2008/02/28
Abstract

We build a small open-economy model with partial dollarization–households hold wealth in domestic currency and a foreign currency as in Felices and Tuesta (2006). The degree of dollarization is endogenous to the extent of exchange rate stabilization by the central bank. We identify the optimal monetary policy response under com-mitment and discretion and assess the optimal degree of exchange rate stabilization inthis set up, drawing policy implications for countries that target inflation in economies of this kind.

Download link Download WP: Optimal Exchange Rate Stabilization in a Dollarized Economy with Inflation Targets

Follow us

Jobs and Internships opportunities

Parts Desk

Opening hours:

Monday to Friday: 9:00 am - 4:30 pm

Virtual Front Desk

mesadepartesvirtual@bcrp.gob.pe

(PDF format, maximum 15 MB)