Following the leader? The relevance of the Fed funds rate for inflation targeting countries

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• 作者：Rodrigo Caputo ; ^{rcaputo@bcentral.cl} ; Luis Oscar Herrera
• 关键词：E52 ; E58 ; F41
• 刊名：Journal of International Money and Finance
• 出版年：2017
• 出版时间：March 2017
• 年：2017
• 卷：71
• 期：Complete
• 页码：25-52
• 全文大小：700 K
• 卷排序：71

文摘

We derive an efficient CPI inflation-based Taylor rule in the context of a small open economy model. The policy rule derived is relevant for inflation targeting countries. We estimate a policy rule like the one we derive, for a set of 26 emerging and developed economies. In emerging and developed countries central banks react to expected CPI inflation as well as to the foreign interest rate. In emerging economies the response to foreign variables is zero once CPI inflation is replaced by domestic inflation.