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Inflation Targeting in Presence of Balassa-Samuelson-Type Productivity Shocks

Igor Masten

出版	SSRN, 2007
URL	http://books.google.com.hk/books?id=ByPUzgEACAAJ&hl=&source=gbs_api

註釋

This paper develops a two-sector small open-economy dynamic stochastic model with permanent technology shocks and price rigidities that allows for simulation of the differential productivity growth (Balassa-Samuleson-type productivity improvement). In addition, the model incorporates quality improvement to replicate typical terms of trade dynamics in new EU members. The model is calibrated for a typical new EU member country to asses whether the Balassa-Samuelson effect poses a threat to fullfiling the inflation Maastricht criterion. In addition, optimal policy is derived for a benchmark parameterization of the model. The results show that productivity growth differential need not generate the inflationary effects that represent significant risks to fullfilling Maastricht criteria in the ERM II.