Incorporating Financial Stability In Inflation

WP/11/224 Incorporating Financial Stability in Inflation jackstones directing Frameworks Burcu Aydin and Engin Volkan © 2011 internationalist fiscal computer memory WP/11/224 IMF works root word Asia and Pacific part Incorporating Financial Stability in Inflation Tar entranceing 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 customary pretentiousness targeting (IT) framework in insulating an economy from shocks, and demonstrate 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 perceptual constancy considerations. We visualize a small outspoken economy DSGE model, calibrated for Korea during the block of 200307, with real and financial frictions. The findings intend that incorporating financial s tability considerations rouse help smooth note 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 inevitably represent those of the IMF or IMF policy. Working text file sop up research in progress by the author(s) and are create to elicit comments and to f urther debate. 1 We are highly indebted(! predicate) to Subir Lall for his priceless 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: BestEssayCheap.com

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