Working Papers
1997
April 1, 1997
Determinants of Korean Trade Flows and their Geographical Destination
Description: This paper investigates the behavior of Korean trade flows during the last three decades and presents estimates of aggregate export and import equations. In particular, it considers different choices for scale and price variables and assesses the relative merits of these alternative specifications in terms of stability and forecasting performance. It also provides an assessment of the drastic change in the geographical destination of Korean exports during the 1990s.
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1997
March 1, 1997
Inflation Targeting in Practice
Description: In recent years, an inflation targeting framework for monetary policy has been adopted in a number of industrial countries. This paper discusses the practical issues that have arisen under the operation of the new framework, and highlights five features of the framework: the assignment of the target, the interaction with other policy goals, the definition of the target, accountability and the role of inflation forecasts. The economic performance of the inflation targeting countries thus far is summarized.
March 1, 1997
Informational Efficiency, Interest Rate Variability, and Central Bank Operations
Description: It is shown how the frequency of central bank intervention in financial markets can affect the incentives for economic agents to acquire information, which will be reflected in market prices and thus become available to policy makers. The optimal frequency of intervention, and therefore the optimal interest rate variability, will balance the desirability of attaining given operational targets against the benefits of encouraging informational efficiency. The ability of the central bank to send clear signals of its own intentions will also depend on market informational efficiency.
March 1, 1997
Possible Effects of European Monetary Union on Switzerland: A Case Study of Policy Dilemmas Caused by Low Inflation and the Nominal Interest Rate Floor
Description: This paper examines the possible effects on Switzerland of asset preference shifts in favor of Swiss-franc-denominated assets that could result from EMU. Alternative policy responses to temporary and persistent asset preference shifts and the consequent pressures for exchange rate appreciation are examined. Simulations of a stylized macroeconomic model of the Swiss economy indicate that monetary policy is likely to be the most effective tool for stabilizing output in the short run, but at the cost of a temporary increase in inflationary pressures. The simulations highlight the dilemmas faced by policymakers in an environment with low inflation and nominal interest rates.
March 1, 1997
Broad Money Demand and Monetary Policy in Tunisia
Description: The development of empirical foundations to the conduct of monetary policy in Tunisia is the central concern of this paper. Finding stable money demand functions, it broadly corroborates the choice of monetary aggregates as intermediate targets of monetary policy by the Tunisian Central Bank. It finds, however, a lower income elasticity than the one currently applied by the Central Bank and proposes a different methodology for defining monetary growth targets. The paper also finds that both interest rates and reserve money are feasible operating targets and suggests that the Central Bank orients its monetary policy more towards transparent operating targets.