IMF Working Papers

Inflation Targeting Lite' in Small Open Economies: The Case of Mauritius

September 1, 2005

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Inflation Targeting Lite' in Small Open Economies: The Case of Mauritius, (USA: International Monetary Fund, 2005) accessed November 21, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper develops a new macrofinance model for small open economies, allowing the investigation of Mauritius's experience with 'inflation targeting lite' as described in Stone (2003). It finds that this monetary policy regime has been associated with a general reduction in inflation, principally through a reduction in inflation expectations. The credibility the Bank of Mauritius has established with its 'inflation targeting lite' regime has allowed it to shift from an emphasis on exchange rate targeting towards inflation targeting. By estimating a model in which the yield curve is modeled explicitly we are able to obtain estimates of inflation expectations.

Subject: Exchange rates, Financial services, Foreign exchange, Inflation, Inflation targeting, Monetary policy, Prices, Real exchange rates, Yield curve

Keywords: A number of monetary policy challenge, B. inflation targeting lite framework, BOM's monetary policy choice, BOM's monetary policy rule, Exchange rate, Exchange rates, Global, High-frequency inflation report, Inflation, Inflation expectation, Inflation targeting, Inflation-forecasting methodology, Managed exchange rates, Managed float, Monetary policy objective, Monetary policy rule, Monetary policy setting, Objectives of the BOM, Open economy, Real exchange rates, Small open economies, WP, Yield curve

Publication Details

  • Pages:

    25

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2005/172

  • Stock No:

    WPIEA2005172

  • ISBN:

    9781451861914

  • ISSN:

    1018-5941