Posted
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April 14, 2011 04:42:51 AM |
Date
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2011-04 |
Author
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Anand, Rahul ; Ding, Ding ; Peiris, Shanaka J. |
Affiliation
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APD, IMF |
Title
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Toward Inflation Targeting in Sri Lanka |
Summary / Abstract
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This paper develops a practical model-based forecasting and policy analysis system (FPAS) to support a transition to an inflation forecast targeting regime in Sri Lanka. The FPAS model provides a relatively good forecast for inflation and a framework to evaluate policy trade-offs. The model simulations suggest that an open-economy inflation targeting rule can reduce macroeconomic volatility and anchor inflationary expectations given the size and type of shocks faced by the economy. Sri Lanka could aim to target a broad inflation range initially due to its susceptibility supply-side shocks while enhancing exchange rate flexibility and strengthening the effectiveness of monetary policy in the transition to an inflation forecast targeting regime. |
Keywords
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Inflation Targeting, Monetary Policy, Bayesian Estimation |
URL
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http://www.imf.org/external/pubs/ft/wp/2011/wp1181.pdf
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See
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