Oil shocks and monetary policy rules in emerging economies
We examine the effects of shocks in the oil market on key macroeconomic variables in small open economies using a dynamic stochastic general equilibrium model with sticky prices and imperfect competition under different monetary policy rules. The numerical solutions show that the types
of exchange rate regimes and monetary policies could partly explain the trends in macroeconomic volatilities considering negative shocks to oil supply (Hamilton, 1983) and positive shocks to oil demand (Kilian, 2009). These findings are confirmed in vector autoregressive responses for Chile
and Israel with inflation targeting under flexible exchange regimes and Hong Kong with fixed regime.
Keywords: E52; F31; F41; exchange rate regimes; inflation and output volatility; inflation targeting; oil shock
Document Type: Research Article
Affiliations: 1: Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore 2: Asset and Liability Management, Manulife Financial, Toronto, Canada
Publication date: 01 December 2013
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