Cover IMF Working Papers
Endogenous Monetary Policy Credibility in a Small Macro Model of Israel
Author: Eyal Argov, David Rose, Mr. Philippe D Karam, Mr. Natan P. Epstein, and Mr. Douglas Laxton
Series:
IMF Working Papers
Volume/Issue:
Volume 2007: Issue 207
Language:
English
Publication Date:
01 Aug 2007
DOI:
https://doi.org/10.5089/9781451867718.001
ISBN:
9781451867718
ISSN:
1018-5941
Pages:
33
Keywords:
WP; exchange rate
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (269.9 KB) Download Epub
This paper extends a small linear model of the Israeli economy to allow for nonlinearities in the inflation-output process that arise from convexity in the Phillips curve and endogenous monetary policy credibility. We find that the dynamic responses to shocks in the extended model more closely resemble features in the data from the period 2001?03. In particular, the extended model does a much better job in accounting for the deterioration in monetary policy credibility and the output costs of regaining monetary policy credibility once it has been lost.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund