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An Estimated DSGE Model for Monetary Policy Analysis in Low-Income Countries
Author: Mr. Shanaka J Peiris and Mr. Magnus Saxegaard
Series:
IMF Working Papers
Volume/Issue:
Volume 2007: Issue 282
Language:
English
Publication Date:
01 Dec 2007
DOI:
https://doi.org/10.5089/9781451868456.001
ISBN:
9781451868456
ISSN:
1018-5941
Pages:
31
Keywords:
WP
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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.
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This paper evaluates monetary policy-tradeoffs in low-income countries using a dynamic stochastic general equilibrium (DSGE) model estimated on data for Mozambique taking into account the sources of major exogenous shocks, and level of financial development. To our knowledge this is a first attempt at estimating a DSGE model for Sub-Saharan Africa excluding South Africa. Our simulations suggests that a exchange rate peg is significantly less successful than inflation targeting at stabilizing the real economy due to higher interest rate volatility, as in the literature for industrial countries and emerging markets.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund