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

Bedri Kamil Onur Taş*, Selahattin Togay

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)1324-1336
Number of pages13
JournalEconomic Modelling
Volume27
Issue number5
DOIs
Publication statusPublished - Sep 2010
Externally publishedYes

Keywords

  • Credibility
  • Kalman filter
  • Monetary policy
  • Partial information

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this