Monetary Policy Under Commodity Price Fluctuations

15 Pages Posted: 20 Apr 2015

See all articles by Roberto Chang

Roberto Chang

Rutgers University, New Brunswick/Piscataway - Faculty of Arts and Sciences-New Brunswick/Piscataway - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: May 2015

Abstract

This paper discusses monetary policy in a New Keynesian open economy subject to commodity price fluctuations. We review theoretical results that imply that stabilizing the producer price index (PPI) is optimal only under special circumstances. In a calibrated version of the model, PPI targeting is compared against a policy that stabilizes a forecast of the consumer price index. The results depend on model specifics, especially elasticities of substitution and the structure of international asset markets.

Suggested Citation

Chang, Roberto, Monetary Policy Under Commodity Price Fluctuations (May 2015). Review of Development Economics, Vol. 19, Issue 2, pp. 282-296, 2015, Available at SSRN: https://ssrn.com/abstract=2595885 or http://dx.doi.org/10.1111/rode.12142

Roberto Chang (Contact Author)

Rutgers University, New Brunswick/Piscataway - Faculty of Arts and Sciences-New Brunswick/Piscataway - Department of Economics ( email )

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New Brunswick, NJ 08901
United States

National Bureau of Economic Research (NBER)

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