Title Endogenous monetary policy credibility in a small macro model of Israel / prepared by Eyal Argov [and others]

Published [Washington, D.C.] : International Monetary Fund, European Dept., ©2007

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Description 1 online resource (33 pages) : illustrations Series IMF working paper ; WP/07/207 IMF working paper ; WP/07/207. Contents I. Introduction; II. Standard FPAS Model for Israel; A. Output Gap Equation; B. Phillips Curve; C. Exchange Rate Equation; D. Monetary Policy Rule; E. Standard Model Calibration; III. Historical Perspective on 2001−03 and Standard Model Limitations; IV. Extending the Standard Model; A. Non linear Phillips Curve; B. Credibility Stock; C. Credibility Stock Effects in the Extended Model; V. Extended Model Properties: Dynamic Responses to Shocks; A. Interest Rate Shocks; B. Implications of Different Initial Levels of Credibility; VI. Conclusion; Table. Standard FPAS Model Calibration Figures1. Interest Rates, Inflation, Exchange Rate, Growth and Unemployment Rate, 2001-04; 2. Interest Rates, Inflation, Exchange Rate, Growth and Unemployment Rate, 2005-07; 3. Interest Rate Shock -- Linear Model, No Endogenous Credibility; 4. Interest Rate Shock -- Initial Credibility = 1.0; 5. Interest Rate Shock -- Initial Credibility = 0.8; 6. Interest Rate Shock -- Initial Credibility = 0.5; 7. Credibility Shock -- Initial Credibility = 1.0; 8. Credibility Shock -- Initial Credibility = 0.8; 9. Inflation Shock -- Linear Model, No Endogenous Credibility; 10. Inflation Shock -- Initial Credibility = 1.0 11. Inflation Shock -- Initial Credibility = 0.5Appendix. The Model; References Summary This paper extends a small linear model of the Israeli economy to allow for nonlinearities in the inflation-output process that arise from convexity in the Phillips curve and endogenous monetary policy credibility. We find that the dynamic responses to shocks in the extended model more closely resemble features in the data from the period 2001-03. In particular, the extended model does a much better job in accounting for the deterioration in monetary policy credibility and the output costs of regaining monetary policy credibility once it has been lost Bibliography Includes bibliographical references (pages 32-33) Notes Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212 MiAaHDL English digitized 2010 HathiTrust Digital Library committed to preserve pda MiAaHDL Print version record Subject Monetary policy -- Israel -- Econometric models Economic history Economic policy -- Econometric models Monetary policy -- Econometric models SUBJECT Israel -- Economic conditions -- Econometric models Israel -- Economic policy -- Econometric models Subject Israel Form Electronic book Author Argov, Eyal, author. International Monetary Fund. European Department. ISBN 1462367933 9781462367931 1452704708 9781452704708 1282474278 9781282474277 1451912242 9781451912241 9786613821805 6613821802

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