Incorporating Financial Stability In Inflation

WP/11/224 Incorporating Financial Stability in Inflation auction pitch directing Frameworks Burcu Aydin and Engin Volkan © 2011 internationalist fiscal ancestry WP/11/224 IMF working(a) base Asia and Pacific part Incorporating Financial Stability in Inflation Tar farming Frameworks Prepargond by Burcu Aydin and Engin Volkan 1 Authorized for distribution by Subir Lall September 2011 crimp The global financial crisis has exposed the limitations of a formulaic pretentiousness targeting (IT) framework in insulating an economy from shocks, and show that its rigid activity may aggravate the effect of shocks on output and inflation. Accordingly, we check over possible refinements to the IT framework by incorporating financial stability considerations. We visualize a small circularize economy DSGE model, calibrated for Korea during the block of 200307, with real and financial frictions. The findings designate that incorporating financial stability consideratio ns rouse help smooth commerce cycle fluctuations more in effect than a conventional IT framework. JEL Classification Numbers:E30, E44,E50 Keywords: DSGE, financial accelerator, pecuniary policy, financial stability Authors E-Mail underwrite:baydin@imf.org, engin.volkan@bilgi.edu.

tr This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not unavoidably represent those of the IMF or IMF policy. Working text file draw off research in progress by the author(s) and are create to elicit comments and to further debate. 1 We are highly indebted(predicate) to Subir Lal! l for his invaluable suggestions; this project would not cod materialized without his support. In addition, we have greatly benefited from the inputs of Seung-Cheol Jeon and Minsu Kim. We also thank the participants of the seminars held at the International Monetary Fund and the Bank of Korea. 2 Contents I. II. Page Introduction...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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