Optimal monetary policy regime for oil producing developing economies: Implications for post-war Iraq

TAŞ B. K. O., Togay S.

ECONOMIC MODELLING, cilt.27, sa.5, ss.1324-1336, 2010 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 27 Sayı: 5
  • Basım Tarihi: 2010
  • Doi Numarası: 10.1016/j.econmod.2010.01.001
  • Dergi Adı: ECONOMIC MODELLING
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Sayfa Sayıları: ss.1324-1336
  • Gazi Üniversitesi Adresli: Evet

Özet

This paper theoretically investigates optimal monetary policy regime for oil producing developing countries. We analyze credibility and reputation of the Central Bank and macroeconomic dynamics under alternative monetary policy regimes. We construct a detailed and realistic model that can be used to analyze macroecomic structure and expectation dynamics of an oil producing open economy. We take into account the asymmetric information between the public and the central bank and theoretically investigate how this asymmetric information impacts the real economy and the credibility of the central bank. The simulation results indicate that central bank achieves higher credibility and lower inflation under dollarization and higher output levels under currency board regime. The model constructed in this paper has many policy implications for oil producing open economies. Using the implications of the model, we make monetary policy regime recommendations for post-war Iraq. (C) 2010 Elsevier B.V. All rights reserved.